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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 Commission file number 1-27
TEXACO INC.
(Exact name of the registrant as specified in its charter)
Delaware 74-1383447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2000 Westchester Avenue
White Plains, New York 10650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 253-4000
Texaco Inc. (1) HAS FILED all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) HAS BEEN subject to such filing requirements for the past 90 days.
As of July 31, 1997, there were outstanding 264,107,386 shares of Texaco
Inc. Common Stock - par value $6.25.
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<PAGE>
PART I - FINANCIAL INFORMATION
TEXACO INC. AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
-------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Sales and services $22,796 $20,876 $10,983 $10,817
Equity in income of affiliates, interest, asset
sales and other 729 656 513 444
------- ------- ------- -------
23,525 21,532 11,496 11,261
------- ------- ------- -------
DEDUCTIONS
Purchases and other costs 17,969 16,127 8,671 8,345
Operating expenses 1,444 1,384 728 700
Selling, general and administrative expenses 792 799 395 399
Maintenance and repairs 171 178 84 90
Exploratory expenses 192 159 93 90
Depreciation, depletion and amortization 757 704 372 354
Interest expense 203 221 102 108
Taxes other than income taxes 268 232 129 127
Minority interest 37 33 16 17
------- ------- ------- -------
21,833 19,837 10,590 10,230
------- ------- ------- -------
Income before income taxes 1,692 1,695 906 1,031
Provision for income taxes 141 620 335 342
------- ------- ------- -------
NET INCOME $ 1,551 $ 1,075 $ 571 $ 689
======= ======= ======= =======
Preferred stock dividend requirements $ 28 $ 29 $ 14 $ 14
------- ------- ------- -------
Net income available for common stock $ 1,523 $ 1,046 $ 557 $ 675
======= ======= ======= =======
Per common share (dollars)
Net income $ 5.86 $ 4.01 $ 2.14 $ 2.59
Cash dividends paid $ 1.70 $ 1.60 $ .85 $ .80
Average number of common shares outstanding
for computation of earnings per share
(thousands) 260,080 260,709 260,090 260,764
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997 AND DECEMBER 31, 1996
(Millions of dollars)
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
-----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 564 $ 511
Short-term investments - at fair value 46 41
Accounts and notes receivable, less allowance for doubtful accounts
of $22 million and $34 million in 1997 and 1996, respectively 4,524 5,195
Inventories 1,632 1,460
Deferred income taxes and other current assets 289 458
------- -------
Total current assets 7,055 7,665
Investments and Advances 5,438 4,996
Properties, Plant and Equipment - at cost 34,462 33,988
Less - accumulated depreciation, depletion and amortization 20,878 20,577
------- -------
Net properties, plant and equipment 13,584 13,411
Deferred Charges 964 891
------- -------
Total $27,041 $26,963
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 472 $ 465
Accounts payable and accrued liabilities
Trade liabilities 2,524 3,472
Accrued liabilities 1,279 1,333
Estimated income and other taxes 1,156 914
------- -------
Total current liabilities 5,431 6,184
Long-Term Debt and Capital Lease Obligations 5,067 5,125
Deferred Income Taxes 809 795
Employee Retirement Benefits 1,204 1,236
Deferred Credits and Other Noncurrent Liabilities 2,459 2,593
Minority Interest in Subsidiary Companies 656 658
------- -------
Total 15,626 16,591
Stockholders' Equity
Market Auction Preferred Shares 300 300
ESOP Convertible Preferred Stock 464 474
Unearned employee compensation and benefit plan trust (362) (378)
Common stock (authorized: 350,000,000 shares, $6.25 par
value; 274,293,417 shares issued) 1,714 1,714
Paid-in capital in excess of par value 608 630
Retained earnings 9,376 8,292
Currency translation adjustment (80) (65)
Unrealized net gain on investments 32 33
------- -------
12,052 11,000
Less - Common stock held in treasury, at cost 637 628
------- -------
Total stockholders' equity 11,415 10,372
------- -------
Total $27,041 $26,963
======= =======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-2-
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Millions of dollars)
<TABLE>
<CAPTION>
(Unaudited)
-----------------------
For the six months
ended June 30,
-----------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,551 $1,075
Reconciliation to net cash provided by (used in)
operating activities
Receivable for refund of IRS deposits (700) -
Depreciation, depletion and amortization 757 704
Deferred income taxes 185 55
Exploratory expenses 192 159
Minority interest in net income 37 33
Dividends from affiliates, greater than (less than)
equity in income (144) 162
Gains on asset sales (287) (37)
Changes in operating working capital (89) 53
Other - net (52) (103)
------ ------
Net cash provided by operating activities 1,450 2,101
INVESTING ACTIVITIES
Capital and exploratory expenditures (1,451) (1,231)
Proceeds from sale of discontinued operations, net of
cash and cash equivalents sold - 344
Proceeds from sales of assets 742 87
Sale of leasehold interests - 147
Purchases of investment instruments (608) (970)
Sales/maturities of investment instruments 657 963
Other - net (142) 5
------ ------
Net cash used in investing activities (802) (655)
FINANCING ACTIVITIES
Borrowings having original terms in excess
of three months
Proceeds 221 113
Repayments (180) (222)
Net decrease in other borrowings (85) (576)
Purchases of common stock (36) (55)
Dividends paid to the company's stockholders
Common (441) (416)
Preferred (28) (29)
Dividends paid to minority shareholders (40) (35)
------ ------
Net cash used in financing activities (589) (1,220)
CASH AND CASH EQUIVALENTS
Effect of exchange rate changes (6) (3)
------ ------
Increase during period 53 223
Beginning of year 511 501
------ ------
End of period $ 564 $ 724
====== ======
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
-3-
<PAGE>
TEXACO INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Discontinued Operations
- -------------------------------
On February 29, 1996, Texaco completed the disposition of its operations
classified as discontinued operations by completing the sale of its worldwide
lubricant additives business to Ethyl Corporation for $136 million in cash and a
three-year note with a face amount of $60 million.
Revenues for the discontinued operations totaled $33 million for the first two
months of 1996, representing activities through the sale date.
Discontinued operations had no significant impact on 1996 results.
Note 2. Inventories
- -------------------
The inventories of Texaco Inc. and consolidated subsidiary companies were as
follows:
<TABLE>
<CAPTION>
As of
--------------------------------------
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
(Millions of dollars)
<S> <C> <C>
Crude oil $ 440 $ 296
Petroleum products and petrochemicals 923 904
Other merchandise 42 58
Materials and supplies 227 202
------ ------
Total $1,632 $1,460
====== ======
</TABLE>
Note 3. Contingent Liabilities
- ------------------------------
Information relative to commitments and contingent liabilities of Texaco Inc.
and subsidiary companies is presented in Notes 14 and 16, pages 63-64 and 67,
respectively, of Texaco Inc.'s 1996 Annual Report to Stockholders.
With respect to the U.S. Internal Revenue Service (IRS) claims discussed in Note
16, page 67, of Texaco Inc.'s 1996 Annual Report to Stockholders, on April 21,
1997 the U.S. Supreme Court decided not to review the decisions of the U.S.
Court of Appeals for the Fifth Circuit and the U.S. Tax Court in the so-called
"Aramco Advantage" case. As a result of this decision by the Supreme Court,
Texaco recognized an after-tax earnings benefit of $488 million in the first
quarter 1997, representing the expected refund of the balance of deposits made
to the IRS in previous years for potential tax claims and accrued interest. The
expected refund, including interest, exceeds $700 million. A significant portion
of the refund is expected to be received in 1997.
----------
In the company's opinion, while it is impossible to ascertain the ultimate legal
and financial liability with respect to contingent liabilities and commitments,
including lawsuits, claims, guarantees, taxes and regulations, the aggregate
amount of such liability in excess of financial reserves is not anticipated to
be materially important in relation to the consolidated financial position or
results of operations of Texaco Inc. and its subsidiaries.
- 4 -
<PAGE>
Note 4. Caltex Group of Companies
- ---------------------------------
Summarized unaudited financial information for the Caltex Group of Companies,
owned 50% each by subsidiaries of Texaco and Chevron Corporation, is presented
below and is reflected on a 100% Caltex Group basis:
<TABLE>
<CAPTION>
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
Gross revenues $9,127 $9,160 $4,433 $4,999
Income before income taxes $ 639 $1,724 $ 319 $1,410
Net income $ 386 $ 989 $ 200 $ 794
</TABLE>
On April 2, 1996, Caltex Petroleum Corporation ("Caltex") completed the sale of
its 50% interest in Nippon Petroleum Refining Company, Limited to its partner
Nippon Oil Company for approximately $2 billion. Caltex' net income for the
second quarter of 1996 included a gain of $621 million associated with this
sale.
Effective April 1, 1997, Caltex' 40% interest in its Bahrain refining joint
venture (Bapco) was sold to the Government of the State of Bahrain at
approximately net book value.
On June 17, 1997, Caltex received a claim from the IRS for $292 million in
excise taxes, plus penalties and interest. The IRS claim relates to crude oil
sales to Japanese customers beginning in 1980. Prior to 1980, Caltex directly
supplied crude oil to its Japanese customers. In 1980, a Caltex subsidiary,
Caltex Trading and Transport Corporation, also became a contractual supplier of
crude oil to the Japanese customers. The IRS position is that this was a
transfer of property, and thus taxable. Caltex is challenging the claim and
fully expects to prevail, since the addition of another supplying company was
not a taxable event. Additionally, Caltex believes the claim is based on an
overstated value. Finally, Caltex disagrees with the imposition and calculation
of interest and penalties. Just as Caltex believes the underlying excise tax
claim is wrong, Caltex also believes the related claim for approximately $140
million in penalties is equally wrong and the IRS claim for almost $1.6 billion
in interest charges is flawed. Caltex believes that the likelihood that it will
pay these charges is remote.
Note 5. Subsequent Events
- -------------------------
On July 25, 1997, the company's Board of Directors approved a two-for-one split
of the company's common stock effected in the form of a 100% stock dividend. The
additional shares will be distributed on September 29, 1997, to shareholders of
record on September 11, 1997.
The Board's action follows the approval by shareholders at the company's
1997 Annual Meeting to increase the number of authorized common shares to
700,000,000 and halve the par value to $3.125 per share.
- 5 -
<PAGE>
The proforma effect of the stock split would be as follows:
<TABLE>
<CAPTION>
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average number of common shares outstanding for
computation of earnings per share (thousands)
As reported 260,080 260,709 260,090 260,764
Split basis 520,161 521,418 520,180 521,528
Net income per common share
As reported $5.86 $4.01 $2.14 $2.59
Split basis $2.93 $2.01 $1.07 $1.29
</TABLE>
The company also announced an increase in its quarterly dividend on its common
stock to 90 cents per share from 85 cents per share, on a pre-split basis. This
quarterly cash dividend will be payable on September 10, 1997 to shareholders of
record on August 5, 1997.
* * * * * * * * * * *
In the determination of preliminary and unaudited financial statements for the
six-month and three-month periods ended June 30, 1997 and 1996, Texaco's
accounting policies have been applied on a basis consistent with the application
of such policies in Texaco's financial statements issued in its 1996 Annual
Report to Stockholders. In the opinion of Texaco, all adjustments and
disclosures necessary to present fairly the results of operations for such
periods have been made. These adjustments are of a normal recurring nature. The
information is subject to year-end audit by independent public accountants.
Texaco makes no forecasts or representations with respect to the level of net
income for the year 1997.
- 6 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total worldwide net income for Texaco Inc. and subsidiary companies for the
second quarter of 1997 was $571 million, or $2.14 per share, as compared with
$689 million, or $2.59 per share, for the second quarter of 1996. Total net
income for the first six months of 1997 was $1,551 million, or $5.86 per share,
as compared with $1,075 million, or $4.01 per share, for the first six months of
1996. Both years included special items.
Net income before special items for the second quarter of 1997 was $440 million,
or $1.64 per share, as compared with $465 million, or $1.73 per share, for the
second quarter of 1996. For the first half of 1997, net income before special
items was $932 million, or $3.48 per share, as compared with $851 million, or
$3.15 per share, for the first half of 1996.
Volume growth in both the upstream and downstream and a continuing commitment to
manage per barrel operating expenses were key drivers of Texaco's strong second
quarter performance. However, abundant supplies of crude oil and products have
put downward pressure on commodity prices and downstream margins.
During the second quarter of 1997:
o Worldwide daily production rose four percent.
o Branded gasoline sales in the U.S. increased two percent.
o Year-to-date capital and exploratory expenditures grew 25 percent to
$1.8 billion.
o Expenses per barrel continued to be managed at levels below
inflation.
In Texaco's upstream business, the successful push to increase production,
especially in the United Kingdom and Partitioned Neutral Zone, is key to the
company's results. But, while production rose in this year's second quarter,
unanticipated start-up problems slowed expected production in the U.K. Captain
Field. Overall, earnings for this year's second quarter were slightly below last
year. Commodity prices this year were lower, and the company increased
exploratory spending focused on expanding its reserve base. International
downstream results were higher this year. Earnings grew in Latin America and
margins in Europe improved over depressed 1996 levels. However, in the U.S.
downstream, 1997 results were significantly lower. A surplus of refined
products, especially on the West Coast, and lackluster demand in the marketplace
drove prices downward, negating the effects of improved refining operations and
higher gasoline sales volumes.
In this year's second quarter, increased capital and exploratory spending
accompanied the company's announcements of natural gas discoveries in Oklahoma
and New Mexico, government approval of Texaco's Hamaca heavy oil project in
Venezuela, the completion of a significant geothermal well in Indonesia and
expansions of the company's natural gas liquids and refined products pipeline
systems. Also, negotiations with Shell continued to combine major elements of
Texaco's U.S. downstream operations.
Results for 1997 and 1996 are summarized in the following table. Details on
special items are included in the functional analysis which follows this table.
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
(Millions of Dollars)
<S> <C> <C> <C> <C>
Net income before special items $ 932 $ 851 $440 $ 465
------ ------ ---- ------
Gains on major asset sales 174 224 174 224
Financial reserves for various issues (43) - (43) -
U.S. tax issue 488 - - -
------ ------ ---- ------
619 224 131 224
------ ------ ---- ------
Total net income $1,551 $1,075 $571 $ 689
====== ====== ==== ======
</TABLE>
- 7 -
<PAGE>
OPERATING EARNINGS
PETROLEUM AND NATURAL GAS
EXPLORATION AND PRODUCTION
United States
Exploration and production earnings in the U.S. for the second quarter of 1997
were $189 million, as compared with $243 million for the second quarter of 1996.
For the first six months of 1997 and 1996, earnings were $500 million and $510
million, respectively. Results for 1997 included a second quarter special charge
of $43 million for the establishment of financial reserves for royalty and
severance tax issues. Excluding the special charge, results for the second
quarter and first six months of 1997 totaled $232 million and $543 million,
respectively.
In the U.S. upstream, lower commodity prices caused second quarter 1997 earnings
to be below last year's level. Excess supplies in the global market led to the
price declines. Average realized crude oil and natural gas prices for the second
quarter of 1997 were $16.95 per barrel and $2.02 per thousand cubic feet (MCF),
respectively, which were $.35 per barrel and $.05 per MCF, respectively, lower
than the same period last year.
Earnings before special items for the first half of 1997 were six percent above
1996. The effects of higher commodity prices in the first quarter significantly
exceeded the second quarter price declines. Lower gas trading results and higher
exploratory activity, mostly in the Gulf of Mexico, partly negated the impact of
higher prices.
Liquids and natural gas production in 1997 was maintained at prior-year levels.
Continued success in enhancing liquids production from existing fields,
particularly in the Gulf of Mexico and Louisiana, offset declines from maturing
fields.
International
Exploration and production earnings outside the U.S. for the second quarter of
1997 were $240 million, as compared with $103 million for the second quarter of
1996. For the first six months of 1997 and 1996, earnings were $396 million and
$233 million, respectively. Results for 1997 included second quarter special
gains of $161 million from the sales of a 15 percent interest in the Captain
Field in the U.K. North Sea, an interest in Canadian gas properties and an
interest in an Australian pipeline system. Excluding the special gains, results
for the second quarter and first six months of 1997 totaled $79 million and $235
million, respectively.
In the international upstream, higher production had a favorable impact on 1997
results. Total daily production in 1997 increased 11 percent over last year. New
production from the Captain Field in the U.K. North Sea contributed to the
increase. Also, new activities coming onstream late in 1996 in the Wafra field
in the Partitioned Neutral Zone, between Saudi Arabia and Kuwait, in the Bagre
Field offshore Angola and in the Danish North Sea led to higher liquids
production. Natural gas production in 1997 benefited from a full six months
operations at the Dolphin Field in Trinidad and from the Chuchupa "B" Field in
Colombia. Crude oil prices were lower in 1997. Average crude oil prices were
$16.91 per barrel for the second quarter, $1.50 per barrel below comparative
1996 prices.
Significantly higher activity levels associated with Texaco's aggressive
exploration program contributed to lower overall results for the second quarter
of 1997. Additionally, earnings for 1997 included lower gas trading results in
the U.K.
- 8 -
<PAGE>
MANUFACTURING, MARKETING AND DISTRIBUTION
United States
Manufacturing, marketing and distribution earnings in the U.S. for the second
quarter of 1997 were $100 million, as compared with $144 million for the second
quarter of 1996. For the first six months of 1997 and 1996, earnings were $106
million and $148 million, respectively. Results for 1997 included a second
quarter special gain of $13 million from the sale of credit card operations.
Excluding the special gain, results for the second quarter and first six months
of 1997 totaled $87 million and $93 million, respectively.
In the U.S. downstream, weak West Coast margins caused lower earnings in the
second quarter and first half of 1997. West Coast product prices were higher in
1996 from shortages caused by regional refining problems and new California
gasoline formulation requirements. Throughout the first half of 1997 branded
gasoline sales volumes increased; however, surplus supplies led to a squeeze on
West Coast gasoline margins. Additionally, while refinery operations improved
this year, refinery upsets in late 1996 and early 1997 caused higher repair
costs and lower product yields in the first quarter of 1997. Lower crude oil
trading margins, cleanup costs associated with the Lake Barre, Louisiana
pipeline break and the absence of earnings from a PO/MTBE business sold on March
1, 1997, also lowered 1997 results. Partially offsetting these negative factors
were improved Gulf Coast sour crude cracking margins.
International
Manufacturing, marketing and distribution earnings outside the U.S. for the
second quarter of 1997 were $132 million, as compared with $304 million for the
second quarter of 1996. For the first six months of 1997 and 1996, earnings were
$236 million and $396 million, respectively. Results for 1996 included a first
quarter special gain of $224 million for Caltex' sale of its interest in a
Japanese affiliate, including the tax on the portion of the sale proceeds
distributed to the shareholders. Excluding the special gain, results for the
second quarter and first six months of 1996 totaled $80 million and $172
million, respectively.
In the international downstream, both second quarter and first half 1997
operating earnings before special items were higher. Improved refining margins
in the U.K. and Panama drove earnings upward this year. In addition, expense
control at all refineries coupled with improved marketing margins and increased
sales volumes in Latin America and the U.K. contributed to the higher earnings.
Competitive pressures in the Norwegian marketplace led to lower results in
Scandinavia.
Lower results in the Caltex area of operations partially offset the improved
earnings in Latin America and Europe. Higher operating earnings in Korea were
more than offset by currency impacts attributable to the South African Rand, and
operational difficulties at the Thailand refinery that adversely affected
product yields.
NONPETROLEUM
Nonpetroleum earnings for the second quarter of 1997 were $1 million, as
compared with $3 million for the second quarter of 1996. For the first six
months of 1997 and 1996, earnings were $13 million and $5 million, respectively.
- 9 -
<PAGE>
CORPORATE/NONOPERATING RESULTS
Corporate and nonoperating charges for the second quarter of 1997 were $91
million, as compared with charges of $108 million for the second quarter of
1996. Corporate and nonoperating earnings for the first six months of 1997 were
$300 million, as compared with charges of $217 million for the first six months
of 1996. Results for the first six months of 1997 included a first quarter
special benefit of $488 million associated with the "Aramco Advantage" U.S. tax
case. Excluding this benefit, corporate and nonoperating charges totaled $188
million for the first six months of 1997.
Reduced interest expense due to lower debt levels and slightly lower interest
rates led to a comparative improvement in second quarter and first half 1997
results. Additionally, these results included higher gains on sales of
marketable securities held for investment by insurance operations.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Texaco's cash, cash equivalents and short-term investments totaled $610 million
at June 30, 1997, as compared with $552 million at year-end 1996. Cash provided
by operating activities of $1.5 billion for the first six months of 1997,
supplemented by proceeds of $742 million from the sale of nonstrategic assets,
exceeded outlays of $1.5 billion relative to the company's capital and
exploratory program, $509 million for payment of dividends to common, preferred
and minority interest shareholders and $80 million for the reduction of debt and
purchases of common stock.
At June 30, 1997, Texaco's ratio of total debt to total borrowed and invested
capital was 31.5%, as compared with 33.6% at year-end 1996. This improvement
reflected strong operating results, the favorable resolution of the "Aramco
Advantage" case and a reduction in debt to $5.5 billion from $5.6 billion at
year-end 1996. At June 30, 1997, Texaco's long-term debt included $968 million
of debt scheduled to mature within one year, which the company has both the
intent and the ability to refinance on a long-term basis. The company maintained
a revolving credit facility with commitments of $1.5 billion, which was unused
at both June 30, 1997 and at year-end 1996.
During the first quarter of 1997, the company issued $150 million of 7.09%
Noncallable Notes Due 2007. Proceeds from this offering were used for working
capital, retirement of existing debt and other general corporate purposes.
As of June 30, 1997, $199 million has been expended under the $500 million
common stock repurchase program announced in 1995, of which $36 million was
expended during the first six months of 1997. The company will continue
repurchasing shares from time to time based on market conditions.
During the first six months of 1997, the company completed various sales, as
follows:
o In March, Texaco exercised an option to terminate a lease arrangement
and obtained ownership of the assets used in its propylene oxide/methyl
tertiary butyl ether (PO/MTBE) business. Concurrent with this
transaction, Texaco sold the PO/MTBE business to a Huntsman Corporation
affiliate for cash and preferred stock. The cash proceeds of $512
million were used to substantially offset the cost of exercising the
option. The preferred stock, with a stated value of $65 million, is
mandatorily redeemable in eleven years.
o During April, the company finalized the sale of a 15% interest in its
U.K. North Sea Captain Field to an affiliate of Korea Petroleum
Development Corporation for approximately $210 million. Of this total
amount, $20 million was received during the first quarter of 1996.
o In April, the company sold its interests in certain producing
operations in Canada for approximately $80 million.
o In May, the company completed the previously announced sale of its
credit card services unit, including its portfolio of proprietary
credit card accounts receivable, to Associates First Capital
Corporation, an indirect majority-owned subsidiary of the Ford Motor
Company. As a result of this sale, Texaco received cash proceeds of
approximately $300 million for its proprietary credit card accounts
receivable and associated processing assets.
- 10 -
<PAGE>
On April 21, 1997, the United States Supreme Court decided not to review the
decisions of the U.S. Court of Appeals for the Fifth Circuit and the U.S. Tax
Court in the so-called "Aramco Advantage" case. In previous years, Texaco made
payments, with associated interest, to the IRS for potential tax claims. As a
result of the Supreme Court action, Texaco expects a refund in excess of $700
million, which represents the remaining balance of these deposits and accrued
interest. A significant portion of the refund is expected to be received in
1997.
On July 25, 1997, Texaco's Board of Directors approved a two-for-one split of
the company's common stock effected in the form of a 100% stock dividend. The
additional shares will be distributed on September 29, 1997, to shareholders of
record on September 11, 1997. The company also announced an increase in its
quarterly dividend on its common stock to 90 cents per share from 85 cents per
share, on a pre-split basis, representing an increase of 5.9 percent. This
quarterly cash dividend will be payable on September 10, 1997 to shareholders of
record on August 5, 1997.
On August 5, 1997, the company issued $200 million of 3.50% Cash-Settled
Convertible Notes Due 2004. Concurrently with the issuance of these Notes, the
company entered into an arrangement that effectively converts its interest cost
relative to these Notes into a LIBOR-based floating rate and fixes Texaco's cost
of future conversions at the face amount of the Notes. Proceeds from this
offering will be used for working capital, retirement of existing debt and other
general purposes. On August 12, 1997 Texaco repurchased certain equipment
leasehold interests in conjunction with a sale/leaseback arrangement for
somewhat less than the proceeds received. Through June 30, 1997, Texaco had
received $509 million and an additional $20 million in July, 1997 for those
leasehold interests.
The company considers it financial position sufficient to meet its anticipated
future financial requirements.
EMPLOYEE SEVERANCE PROGRAM
- --------------------------
On October 30, 1996, Texaco announced a companywide realignment designed to
enhance the company's ability to grow existing and new businesses. This
realignment, coupled with other organizational enhancements such as the
consolidation of operations, is designed to stimulate growth and improve
efficiencies in both support and operating functions. However, it is expected
that some overlapping activities will be eliminated resulting in the reduction
of some 750 employees worldwide by the end of 1997. An after-tax provision of
$56 million was recorded in the fourth quarter of 1996 to cover the costs of
employee separations, including employees of affiliates. Through June 30, 1997,
approximately 750 employees have been terminated with a related commitment to
severance payments of $30 million after-tax. Of this commitment, payments of $18
million have been made and charged against the reserve as of June 30, 1997. The
remaining reserve balance will be used for ongoing employee separation benefits
relating principally to affiliates, for which Texaco is responsible.
NEW ACCOUNTING STANDARD
- -----------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 128, Earnings per Share. Under SFAS 128,
companies currently required to report primary and fully diluted earnings per
share (EPS), will instead report basic and diluted EPS, respectively. Currently,
primary EPS considers the average number of common shares outstanding and the
potential dilution that would result if conversion rights associated with
certain outstanding securities were exercised. Fully diluted EPS considers all
potentially dilutive securities. Basic EPS, which will replace primary EPS, does
not consider any potential dilution. Diluted EPS is essentially similar to fully
diluted EPS.
Texaco must adopt SFAS 128 for its fiscal year 1997 financial statements and, at
that time, restate the per share amounts of prior periods. Amounts to be
reported as basic and diluted EPS in accordance with the new Statement will not
differ significantly from previously reported primary and fully diluted EPS.
- 11 -
<PAGE>
CAPITAL AND EXPLORATORY EXPENDITURES
- ------------------------------------
Capital and exploratory expenditures, including equity in such expenditures of
affiliates, were $1,798 million for the first half of 1997, as compared with
$1,437 million for the same period of 1996. Expenditures for the second quarter
of 1997 amounted to $999 million versus $796 million for the second quarter of
1996.
Texaco's continued focus on high impact projects in the U.S. upstream, both
onshore and offshore, generated increased exploration and development
expenditures in the first half of 1997. In the deepwater Gulf of Mexico,
platform construction and development drilling continued in the Arnold and
Petronius fields while delineation drilling is underway in the Fuji and Gemini
prospects. Aggressive drilling and development programs in the traditional
offshore shelf area and onshore, as well as enhanced oil recovery efforts in
California, also increased investments. Construction continued during the second
quarter on a jointly owned natural gas pipeline and processing complex in the
Gulf Coast area. There was, however, reduced spending this year on lease
acquisitions compared to significant expenditures in 1996.
Internationally, upstream investments for the first half of 1997 exceeded the
aggressive activity level of 1996. Higher expenditures reflected development
work in the U.K. North Sea, principally for continuing activities in the Mariner
and Galley fields. Exploration and development activities continued in China and
Indonesia.
Downstream expenditures in the U.S. declined slightly in 1997. While spending
for refinery upgrades and marketing investment decreased, construction continued
on a major crude oil pipeline that will service new deepwater and subsalt
production in the Gulf of Mexico.
Internationally, downstream spending increased due to marketing investments and
initiatives in the Asia-Pacific area by Texaco's affiliate, Caltex Petroleum
Corporation, principally in Hong Kong. Texaco also continued to invest in
selected Latin American growth markets.
- 12 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
Reference is made to the discussion of Contingent Liabilities in Note 3 to the
Consolidated Financial Statements of this Form 10-Q, Item 1 of Texaco Inc.'s
Form 10-Q for the quarterly period ended March 31, 1997 and to Item 3 of Texaco
Inc.'s 1996 Annual Report on Form 10-K, which are incorporated herein by
reference.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
The Annual Meeting of the Stockholders of Texaco Inc. was held on May 13, 1997,
for the purpose of (1) electing four directors, (2) approving the appointment of
auditors for the year 1997, (3) amending the Certificate of Incorporation to
increase the number of authorized shares and reduce the par value, (4) approving
the Incentive Compensation Program of 1997 and (5) acting on three stockholder
proposals concerning the establishment of a shareholders' advisory committee,
classification of the Board of Directors and diversity on the Board of
Directors. The following summarizes the stockholder voting results:
Stockholders elected Dr. Franklyn G. Jenifer and Messrs. Willard C. Butcher,
Edmund M. Carpenter and Thomas A. Vanderslice, each for a three-year term
expiring at the 2000 Annual Meeting. The vote tabulation for each individual
director was as follows:
<TABLE>
<CAPTION>
Director Shares Voted for % of Vote Shares Withheld
-------- ---------------- --------- ---------------
<S> <C> <C> <C>
Willard C. Butcher 231,977,862 97.9 5,005,642
Edmund M. Carpenter 232,455,636 98.1 4,527,868
Franklyn G. Jenifer 232,168,142 98.0 4,815,362
Thomas A. Vanderslice 232,359,728 98.0 4,623,776
</TABLE>
Directors continuing in office were Dr. John Brademas, Mrs. Robin B. Smith, and
Messrs. Peter I. Bijur, Michael C. Hawley, Allen J. Krowe, Thomas S. Murphy,
Charles H. Price II, William C. Steere and William Wrigley. Mr. Krowe, upon
reaching the company's mandatory retirement age, retired from the company
effective July 1, 1997 and resigned from the Board of Directors also effective
July 1, 1997.
The appointment of Arthur Andersen LLP to audit the accounts of the company and
its subsidiaries for the fiscal year 1997 was approved. Of those shares voted,
234,279,670 shares, or 99.3% voted in favor, 1,796,133 shares, or .7% voted
against, and 934,700 shares abstained.
The proposal to amend the Certificate of Incorporation as set forth in Item 3 of
the 1997 Proxy Statement, was approved. Of those shares voted, 217,469,056
shares, or 92.5% voted in favor, 17,656,932 shares, or 7.5% voted against, and
1,857,511 shares abstained.
The proposal to approve the Incentive Compensation Program of 1997 was approved.
Of those shares voted, 173,228,950 shares, or 83.4% voted in favor, 34,517,604
shares, or 16.6% voted against and 2,763,394 shares abstained.
Stockholders rejected the three stockholder proposals. The proposal relating to
the establishment of a shareholders' advisory committee, as set forth in Item 5
of the 1997 Proxy Statement, was rejected by a vote of 195,647,188 shares, or
95.4%, against. Shares voting for the proposal totaled 9,439,366 shares, or
4.6%, and 5,423,800 shares abstained.
The proposal relating to the classification of the Board of Directors, as set
forth in Item 6 of the 1997 Proxy Statement, was rejected by a vote of
111,287,711 shares, or 53.7%, against. Shares voting for the proposal totaled
96,017,962 shares, or 46.3%, and 3,264,677 shares abstained.
The proposal relating to diversity on the Board of Directors, as set forth in
Item 7 of the 1997 Proxy Statement, was rejected by a vote of 182,925,982
shares, or 89.3%, against. Shares voting for the proposal totaled 21,940,019
shares, or 10.7%, and 5,643,949 shares abstained.
- 13 -
<PAGE>
Item 5. Other Information
- -------------------------
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
(Millions of dollars)
<S> <C> <C> <C> <C>
FUNCTIONAL NET INCOME
- ---------------------
Operating earnings
Petroleum and natural gas
Exploration and production
United States $ 500 $ 510 $ 189 $ 243
International 396 233 240 103
------ ------ ------ ------
Total 896 743 429 346
------ ------ ------ ------
Manufacturing, marketing and distribution
United States 106 148 100 144
International 236 396 132 304
------ ------ ------ ------
Total 342 544 232 448
------ ------ ------ ------
Total petroleum and natural gas 1,238 1,287 661 794
Nonpetroleum 13 5 1 3
------ ------ ------ ------
Total operating earnings 1,251 1,292 662 797
Corporate/Nonoperating 300 (217) (91) (108)
------ ------ ------ ------
Total net income $1,551 $1,075 $ 571 $ 689
====== ====== ====== ======
CAPITAL AND EXPLORATORY EXPENDITURES -
- --------------------------------------
INCLUDING EQUITY IN AFFILIATES
------------------------------
Exploration and production
United States $ 781 $ 621 $ 429 $ 355
International 546 450 264 243
------ ------ ------ ------
Total 1,327 1,071 693 598
------ ------ ------ ------
Manufacturing, marketing and distribution
United States 152 156 92 79
International 308 201 207 114
------ ------ ------ ------
Total 460 357 299 193
------ ------ ------ ------
Other 11 9 7 5
------ ------ ------ ------
Total, including equity in affiliates $1,798 $1,437 $ 999 $ 796
====== ====== ====== ======
Texaco Inc. and subsidiary companies
Exploratory expenses included above:
United States $ 76 $ 67 $ 34 $ 44
International 116 92 59 46
------ ------ ------ ------
Total $ 192 $ 159 $ 93 $ 90
====== ====== ====== ======
</TABLE>
- 14 -
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
-------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
OPERATING DATA - INCLUDING INTERESTS
- ------------------------------------
IN AFFILIATES
-------------
Exploration and Production
- --------------------------
<S> <C> <C> <C> <C>
United States
- -------------
Net production of crude oil and natural
gas liquids (000 BPD) 385 387 385 391
Net production of natural gas - available
for sale (000 MCFPD) 1,666 1,666 1,677 1,685
------ ------ ------ ------
Total net production (000 BOEPD) 663 665 665 672
Natural gas sales (000 MCFPD) 3,700 3,120 3,561 3,007
Natural gas liquids sales - (including
purchased LPGs) (000 BPD) 188 216 172 188
Average U.S. crude (per bbl) $18.29 $16.90 $16.95 $17.30
Average U.S. natural gas (per mcf) $ 2.36 $ 2.11 $ 2.02 $ 2.07
Average WTI (Spot) (per bbl) $21.38 $20.74 $19.97 $21.73
Average Kern (Spot) (per bbl) $15.07 $15.18 $14.11 $15.46
International
- -------------
Net production of crude oil and natural
gas liquids (000 BPD)
Europe 116 115 118 110
Indonesia 147 140 153 144
Partitioned Neutral Zone 92 74 94 75
Other 67 60 68 60
------ ------ ------ ------
Total 422 389 433 389
Net production of natural gas - available
for sale (000 MCFPD)
Europe 207 192 172 180
Colombia 156 113 173 111
Other 93 60 83 66
------ ------ ------ ------
Total 456 365 428 357
Total net production (000 BOEPD) 498 450 504 449
Natural gas sales (000 MCFPD) 574 459 528 442
Natural gas liquids sales - (including
purchased LPGs) (000 BPD) 93 106 104 95
Average International crude (per bbl) $18.22 $18.25 $16.91 $18.41
Average U.K. natural gas (per mcf) $ 2.73 $ 2.56 $ 2.59 $ 2.48
Average Colombia natural gas (per mcf) $ 1.09 $ .93 $ 1.12 $ .92
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
-------------------------------------------------
For the six months For the three months
ended June 30, ended June 30,
------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
OPERATING DATA - INCLUDING INTERESTS
- ------------------------------------
IN AFFILIATES
-------------
Manufacturing, Marketing and Distribution
- -----------------------------------------
<S> <C> <C> <C> <C>
United States
- -------------
Refinery input (000 BPD)
Subsidiary 413 399 418 403
Affiliate - Star Enterprise 332 317 328 318
----- ----- ----- -----
Total 745 716 746 721
Refined product sales (000 BPD)
Gasolines 505 491 512 507
Avjets 92 129 94 127
Middle Distillates 215 212 216 205
Residuals 72 62 59 62
Other 119 133 117 133
----- ----- ----- -----
Total 1,003 1,027 998 1,034
International
- -------------
Refinery input (000 BPD)
Europe 341 337 335 340
Affiliate - Caltex 411 383 414 266
Latin America/West Africa 59 62 55 66
----- ----- ----- -----
Total 811 782 804 672
Refined product sales (000 BPD)
Europe 495 473 494 467
Affiliate - Caltex 574 626 561 539
Latin America/West Africa 391 391 406 396
Other 55 74 74 73
----- ----- ----- -----
Total 1,515 1,564 1,535 1,475
</TABLE>
- 16 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
-- (3) Copy of By-Laws of Texaco Inc., as amended to and including
July 25, 1997.
-- (4.1) Form of First Supplemental Indenture, dated as of January 31,
1990, among Texaco Capital Inc., Texaco Inc. and The Chase
Manhattan Bank (National Association), as Trustee. (This
document was previously filed with the Securities and Exchange
Commission, File No. 1-27, as Exhibit 4.1 to Texaco Capital
Inc.'s Registration Statement on Form S-3 (Registration Nos.
33-33303 and 33-33303-01) on February 1, 1990, and is being
filed herein only for EDGAR purposes.)
-- (4.1(a)) Form of First Supplement to the First Supplemental
Indenture, dated as of October 11, 1990. (This document was
previously filed with the Securities and Exchange Commission,
File No. 1-27, as Exhibit 4.1(a) to Texaco Inc.'s Current
Report on Form 8-K, dated October 12, 1990 and filed on October
15, 1990, and is being filed herein only for EDGAR purposes.)
-- (4.1(b)) Form of Second Supplement to the First Supplemental
Indenture, dated as of August 5, 1997, including Forms of the
Note representing Texaco Capital Inc.'s $200 million 3.50%
Guaranteed Cash-Settled Convertible Notes Due 2004.
-- (11) Computation of Earnings Per Share of Common Stock of Texaco
Inc. and Subsidiary Companies.
-- (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on
a Total Enterprise Basis.
-- (20) Copy of Texaco Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 (including portions of
Texaco Inc.'s Annual Report to Stockholders for the year 1996)
and a copy of Texaco Inc.'s Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1997, as previously filed
by the Registrant with the Securities and Exchange Commission,
File No. 1-27.
-- (22) Information relative to the various matters submitted to a
vote of security holders are described on pages 9 through 27 of
the 1997 Proxy Statement of Texaco Inc., relating to the Annual
Meeting of Stockholders held on May 13, 1997, as previously
filed by the Registrant with the Securities and Exchange
Commission, File No. 1-27.
-- (27) Financial Data Schedule.
(b) Reports on Form 8-K:
During the second quarter of 1997, the Registrant filed a Current Report on
Form 8-K for the following events:
1. April 22, 1997 (date of earliest event reported: April 21, 1997)
Item 5. Other Events -- reported that Texaco (1) announced that it had
been notified that the U.S. Supreme Court has decided not to review
the decisions of the U.S. Court of Appeals for the Fifth Circuit and
the U.S. Tax Court in the so-called "Aramco Advantage" case and (2)
issued an Earnings Press Release for the first quarter 1997. Texaco
appended as exhibits thereto a copy of the Press Release entitled
"Texaco Advised Supreme Court Will Let Stand Favorable Decision in
`Aramco Advantage' Case," dated April 21, 1997 and "Texaco Reports
Significant Increase in Net Income: First Quarter 1997 Earnings Reach
$980 Million," dated April 22, 1997, respectively.
2. June 19, 1997 (date of earliest event reported: June 17, 1997)
Item 5. Other Events -- reported that the Registrant's 50-percent
owned affiliate, Caltex Petroleum Corporation, received a claim from
the U.S. Internal Revenue Service for $292 million in excise taxes,
plus interest and penalties.
- 17 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Texaco Inc.
---------------------
(Registrant)
By: R.C. Oelkers
---------------------
(Comptroller)
By: R.E. Koch
---------------------
(Assistant Secretary)
Date: August 13, 1997
---------------
- 18-
EXHIBIT 3
BY-LAWS OF TEXACO INC.
A Delaware Corporation
ARTICLE I.
Stockholders.
SECTION 1. Annual Meeting. The Annual Meeting of stockholders shall be held
on the fourth Tuesday in April of each year at 2:00 P.M., or at such time of day
or on such other date in each calendar year as may be fixed by the Board of
Directors, for the election of directors and the transaction of any other
business as may properly come before the meeting.
SECTION 2. Stockholder Action; Special Meetings. Any action required or
permitted to be taken by the stockholders of the Company must be effected at a
duly called annual or special meeting of such holders and may not be effected by
any consent in writing by such holders. Except as otherwise required by law and
subject to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the Company may be called only by the Board of
Directors pursuant to a resolution approved by a majority of the entire Board of
Directors.
SECTION 3. Notice of Meetings. Notice of each meeting of stockholders,
annual or special, stating the time and place, and, if a special meeting, the
purpose or purposes in general terms, shall be mailed no earlier than 60 days
and no later than 10 days prior to the meeting to each stockholder at the
stockholder's address as the same appears on the books of the Company.
SECTION 4. Place. Meetings of the stockholders shall be held at such place
or places as the Board of Directors may direct, the place to be specified in
the notice.
Section 5. Quorum. At any meeting of stockholders, the holders of a
majority of the voting shares issued and outstanding, being present in person or
represented by proxy, shall be a quorum for all purposes, except where otherwise
provided by statute.
SECTION 6. Adjournments. Any annual or special meeting of stockholders duly
and regularly called in accordance with these by-laws may adjourn one or more
times and no further notice of such adjourned meeting or meetings shall be
necessary. If at any annual or special meeting of stockholders a quorum shall
fail to attend in person or by proxy, a majority in interest of the stockholders
attending in person or by proxy may adjourn the meeting to another time, or to
another time and place, and there may be successive adjournments for like cause
and in like manner without further notice until a quorum shall attend. Any
business may be transacted at any such adjourned meeting or meetings which might
have been transacted at the meeting as originally called.
SECTION 7. Organization. The Chairman of the Board, or, in his absence, the
Vice Chairman, or, in their absence, the President, or, in their absence, one of
the Executive Vice Presidents, or, in their absence, one of the Senior Vice
Presidents, or, in their absence, a Vice President appointed by the
stockholders, shall call meetings of the stockholders to order and shall act as
chairman thereof. The Secretary of the Company, if present, shall act as
secretary of all meetings of the stockholders; and, in his absence, the
presiding officer may appoint a secretary.
SECTION 8. Voting. At each meeting of the stockholders, every stockholder
of record (at the closing of the transfer books if closed) shall be entitled to
vote in person or by proxy appointed by an instrument in writing subscribed by
such stockholder or by his duly authorized attorney and delivered to and filed
with the Secretary at the meeting; and each stockholder shall have one vote for
each share of stock standing in his name. Voting for directors, and upon any
question at any meeting, shall be by ballot, if demanded by any stockholder.
SECTION 9. Stockholder Proposals. Stockholders may present proper business
for stockholder action at an annual meeting by giving timely notice in writing
to the Secretary of their intention to bring such business before the meeting.
To be timely, a stockholder's notice must be delivered to, or mailed and
received at, the office of the Company in Harrison, New York, addressed to the
attention of the Secretary, not less than 60 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting of stockholders;
provided, however, that if the date of the annual meeting is advanced more than
30 days prior to or delayed by more than 60 days after such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such meeting is
first made. The stockholder's notice shall set forth (a) the name and address of
the stockholder proposing such business, (b) a brief
* 1 *
<PAGE>
description of the business desired to be brought before the meeting and any
material interest in such business of such stockholder, and (c) the number of
shares of the Company which are beneficially owned by the stockholder. The
chairman of the meeting may refuse to permit any business to be brought before
an annual meeting by a stockholder without compliance with the procedure set
forth in this Section 9.
For purposes of this section, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or a
comparable national news service or in a document publicly filed by the Company
with the Securities and Exchange Commission.
Notwithstanding the foregoing provisions of this by-law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and regulations
thereunder with respect to matters set forth in this by-law. Nothing in this
by-law shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the company's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
SECTION 10. List of Stockholders. The Secretary shall keep records from
which a list of stockholders can be compiled, and shall furnish such list upon
order of the Board of Directors.
ARTICLE II.
The Board of Directors.
SECTION 1. Number, Election and Terms. Except as otherwise fixed by or
pursuant to the provisions of Article IV of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors under specified circumstances, the number of the directors
of the Company shall be fixed from time to time by the Board of Directors but
shall not be less than three. The directors, other than those who may be elected
by the holders of any class or series of stock having a preference over the
Common Stock as to dividends or upon liquidation, shall be classified, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as possible, as determined by the Board of Directors, one
class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1985, another class to be originally elected for a
term expiring at the annual meeting of stockholders to be held in 1986, and
another class to be originally elected for a term expiring at the annual meeting
of stockholders to be held in 1987, with each class to hold office until its
successor is elected and qualified. At each annual meeting of the stockholders
of the Company, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
SECTION 2. Newly Created Directorships and Vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article IV of the
Certificate of Incorporation relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, newly created
directorships resulting from any increases in the number of directors or any
vacancies on the Board of Directors resulting from death, resignation or
disqualification, or other cause shall be filled by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any director so elected shall stand for
election (for the balance of his term) at the next annual meeting of
stockholders, unless his term expires at such Annual Meeting. Any vacancy on the
Board of Directors resulting from removal by stockholder vote shall be filled
only by the vote of a majority of the voting power of all shares of the Company
entitled to vote generally in the election of Directors, voting together as a
single class. The affirmative vote of the holders of at least a majority of the
then outstanding shares of capital stock of the Company voting generally in the
election of Directors, voting together as a single class, shall be required to
repeal the foregoing provisions.
SECTION 3. Removal. Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect Directors under specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote of the holders of
66-2/3% of the combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of Directors, voting together as a
single class.
SECTION 4. Nominations. Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation, nominations for the election of Directors may be made by the
Board of Directors or a proxy committee appointed by the Board of Directors or
by any stockholder entitled to vote in
* 2 *
<PAGE>
the election of Directors generally. However, any stockholder entitled to vote
in the election of Directors generally may nominate one or more persons for
election as Directors at a meeting only if written notice of such stockholder's
intent to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Company not later than (i) with respect to an election to be held at an annual
meeting of stockholders, 90 days in advance of such meeting, and (ii) with
respect to an election to be held at a special meeting of stockholders for the
election of Directors, the close of business on the seventh day following the
date on which notice of such meeting is first given to stockholders. Each such
notice shall set forth: (a) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the Company if so
elected. The chairman of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedure.
SECTION 5. Organization Meeting of the Board. At the last regular meeting
of the Board of Directors prior to each annual meeting of stockholders, the
Board of Directors shall establish its organization, elect and appoint officers
and appoint committee members. Such action may also be taken at another place
and time fixed by written consent of the Directors.
SECTION 6. Regular Meetings. Regular meetings of the Board are fixed and
may be held without notice at the office of the Company in Harrison, New York on
the fourth Friday in each month at 9:00 A.M., or at such other time and place,
either within or without the State of Delaware, as the Board may provide by
resolution, without other notice than such resolution. If less than a quorum is
present at any meeting time and place, those present may adjourn from time to
time until a quorum shall be present, but if there shall be no quorum prior to
another regular meeting time, then such meetings of less than a quorum need not
be recorded.
SECTION 7. Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman of the Board, or, in his absence, by the Vice
Chairman of the Board, or, in their absence, by the President, or by one-third
of the Directors then in office. The person or persons authorized to call
special meetings of the Board may fix any place, either within or without the
State of Delaware, as the place for holding any special meeting. Unless
otherwise specified in the notice thereof, any business may be transacted at a
special meeting.
SECTION 8. Notice of Special Meetings. The Secretary shall mail to each
director notice of any special meeting at least two days before the meeting, or
shall telegraph or telephone such notice not later than the day before the
meeting. When all Directors are present, any business may be transacted without
any previous notice. Any director may waive notice of any meeting.
SECTION 9. Quorum. A majority of the total number of Directors, or half of
the total number when the number of Directors then in office is even, shall
constitute a quorum for the transaction of business, and a majority of those
present at the time and place of any regular or special meeting, although less
than a quorum, may adjourn the same from time to time, as provided in these
by-laws.
SECTION 10. Chairman. At all meetings of the Board, the Chairman of the
Board, or, in his absence, the Vice Chairman of the Board, or, in their absence,
the President, or, in their absence, a chairman chosen by the Directors present,
shall preside.
SECTION 11. Action without Meeting. A statement in writing, signed by all
members of the Board of Directors or the Executive Committee, shall be deemed to
be action by the Board or Committee, as the case may be, to the effect therein
expressed, and it shall be the duty of the Secretary to record such statement in
the minute books of the Company under its proper date.
ARTICLE III.
Executive Committee and Other Committees.
SECTION 1. Executive Committee. The Board of Directors shall appoint an
Executive Committee of seven or more members to serve during the pleasure of the
Board to consist of the Chairman of the Executive Committee, the
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Chairman of the Board, the Vice Chairman of the Board, the President, and such
additional Directors as the Board may from time to time designate.
SECTION 2. The Chairman of the Executive Committee. The Chairman of the
Executive Committee shall be designated by the Board of Directors and shall be a
member of the Board and of the Executive Committee. He shall preside at meetings
of the Executive Committee, and shall do and perform such other things as may
from time to time be assigned to him by the Board of Directors.
SECTION 3. Vacancies. Vacancies in the Executive Committee shall be filled
by the Board.
SECTION 4. Executive Committee to Report. All action by the Executive
Committee shall be reported promptly to the Board and such action shall be
subject to review by the Board, provided that no rights of third parties shall
be affected by such review.
SECTION 5. Procedure. The Executive Committee, by a vote of a majority of
all of its members, shall fix its own times and places of meeting, shall
determine the number of its members constituting a quorum for the transaction of
business, and shall prescribe its own rules of procedure, no change in which
shall be made save by a majority vote of all of its members.
SECTION 6. Powers. During the intervals between the meetings of the Board,
the Executive Committee shall possess and may exercise all the powers of the
Board in the management and direction of the business and affairs of the
Company, except those which by applicable statute are reserved to the Board of
Directors.
SECTION 7. Other Committees. From time to time the Board may appoint other
committees, and they shall have such powers as shall be specified in the
resolution of appointment.
ARTICLE IV.
Officers.
SECTION 1. Number. The Board of Directors shall elect the executive
officers of the Company which may include a Chairman of the Board, one or more
Vice Chairmen of the Board, a President, one or more Vice Presidents (one or
more of whom may be designated as Executive Vice Presidents or as Senior Vice
Presidents or by other designations), a General Counsel, a Secretary, a
Treasurer, a Comptroller, and a General Tax Counsel. A person may at the same
time hold, exercise and perform the powers and duties of more than one executive
officer position. In addition to the executive officers, the Board may appoint
one or more Assistant Secretaries, Assistant Treasurers and Assistant
Comptrollers and such other officers or agents as the Board may from time to
time deem necessary or desirable. All officers and agents shall perform the
duties and exercise the powers usually incident to the offices or positions held
by them, those prescribed by these by-laws, and those assigned to them from time
to time by the Board or by the Chief Executive Officer.
SECTION 2. The Chairman of the Board. The Chairman of the Board shall be a
member of the Board of Directors and of the Executive Committee. He shall
preside at meetings of the stockholders and of the Directors, and shall keep in
close touch with the administration of the affairs of the Company, shall advise
and counsel with the Vice Chairman of the Board and the President, and with
other executives of the Company and shall do and perform such other duties as
may from time to time be assigned to him by the Board of Directors or by the
Executive Committee.
SECTION 3. The Vice Chairman of the Board. The Vice Chairman of the Board
shall be a member of the Board of Directors and the Executive Committee. He
shall keep in close touch with the administration of the affairs of the Company,
shall advise and counsel with the Chairman of the Board and the President, and
with other executives of the Company, and shall do and perform such other duties
as may from time to time be assigned to him by the Board of Directors or the
Executive Committee.
SECTION 4. The President. The President shall be a member of the Board of
Directors and of the Executive Committee. He shall keep in close touch with the
administration of the affairs of the Company, shall advise and counsel with the
Chairman of the Board and the Vice Chairman of the Board and with other
executives of the Company, and shall do and perform such other duties as may
from time to time be assigned to him by the Board of Directors or the Executive
Committee. In the absence of the Chairman of the Board, he shall preside at
meetings of the stockholders and of the Directors.
SECTION 5. The Chief Executive Officer. Either the Chairman of the Board,
or the President, as the Board of Directors may designate, shall be the Chief
Executive Officer of the Company. The officer so designated shall have, in
addition to the powers and duties applicable to the office set forth in either
Section 2 or 4 of this Article IV, general active supervision over the business
and affairs of the Company and over its several officers, agents, and employees,
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subject, however, to the direction and control of the Board or the Executive
Committee. The Chief Executive Officer shall see that all orders and resolutions
of the Board or the Executive Committee are carried into effect, and, in
general, shall perform all duties incident to the position of Chief Executive
Officer and such other duties as may from time to time be assigned by the Board
or the Executive Committee.
SECTION 6. The Executive Vice Presidents. The Executive Vice Presidents
shall keep in touch with the administration of the affairs of the Company, shall
advise and counsel with the Chairman of the Board, the Vice Chairman of the
Board and with the President and with other executives of the Company, and shall
do and perform such other duties as from time to time may be assigned to them by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. In the absence of the Chairman of
the Board, the Vice Chairman of the Board and the President, the senior
Executive Vice President shall preside at meetings of the stockholders.
SECTION 7. The Senior Vice Presidents. Each Senior Vice President shall
have such powers as may be conferred upon him by the Board of Directors, and
shall perform such duties as from time to time may be assigned to him by the
Board of Directors, the Executive Committee, the Chairman of the Board, the Vice
Chairman of the Board, or the President.
SECTION 8. The Vice Presidents. Each Vice President shall have such powers
as may be conferred upon him by the Board of Directors, and shall perform such
duties as from time to time may be assigned to him by the Board of Directors,
the Executive Committee, the Chairman of the Board, the Vice Chairman of the
Board, or the President.
SECTION 9. The General Counsel. The General Counsel shall have charge of
all the legal affairs of the Company and shall exercise supervision over its
contract relations.
SECTION 10. The Secretary. The Secretary shall keep the minutes of all
meetings of the stockholders and the Board of Directors in books provided for
the purpose. He shall attend to the giving and serving of all notices for the
Company. He shall sign with the Chairman of the Board, the Vice Chairman of the
Board, the President, and Executive Vice President, a Senior Vice President, or
a Vice President, such contracts as may require his signature, and shall in
proper cases affix the seal of the Company thereto. He shall have charge of the
certificate books and such other books and papers as the Board of Directors may
direct. He shall sign with the Chairman of the Board, the President, or a Vice
President certificates of stock, and he shall in general perform all the duties
incident to the Office of Secretary, subject to the control of the Board, and
shall perform such other duties as from time to time may be assigned to him by
the Board of Directors, the Executive Committee, the Chairman of the Board, the
Vice Chairman of the Board, or the President. Any Assistant Secretary may, in
his own name, perform any duty of the Secretary, when so requested by the
Secretary or in the absence of that officer, and may perform such duties as may
be prescribed by the Board. In the absence of the Secretary and of all Assistant
Secretaries, minutes of any meetings may be kept by a Secretary pro tem,
appointed for that purpose by the presiding officer.
SECTION 11. The Treasurer. The Treasurer shall have charge and custody of
and be responsible for all the funds and securities of the Company, and may
invest the same in any securities as may be permitted by law; designate
depositories in which all monies and other valuables to the credit of the
Company may be deposited; render to the Board, or any committee designated by
the Board, whenever the Board or such committee may require, an account of all
transactions as Treasurer; and in general perform all the duties of the office
of Treasurer and such other duties as from time to time may be assigned by the
Chairman of the Board, the Vice Chairman of the Board, the President, the
officer of the Company who may be designated Chief Financial Officer, and the
Board of Directors. In case one or more Assistant Treasurers be appointed, the
Treasurer may delegate to them the authority to perform such duties as the
Treasurer may determine.
SECTION 12. The Comptroller. The Comptroller shall be the principal
accounting officer of the corporation; shall have charge of the Company's books
of accounts, records and auditing, shall ensure that the necessary internal
controls exist within the Company to provide reasonable assurance that the
Company's assets are safeguarded and that financial records are maintained and
publicly disclosed in accordance with generally accepted accounting principles;
and in general perform all the duties incident to the office of Comptroller and
such other duties as from time to time may be assigned by the Chairman of the
Board, the Vice Chairman of the Board, the President, the officer of the
Company who may be designated Chief Financial Officer, and the Board of
Directors. In case one or more Assistant Comptrollers be appointed, the
Comptroller may delegate to them such duties as the Comptroller may determine.
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SECTION 13. The General Tax Counsel. The General Tax Counsel shall have
charge of all the tax affairs of the Company.
SECTION 14. Tenure of Officers: Removal. All officers elected or appointed
by the Board shall hold office until their successor is elected or appointed
and qualified, or until their earlier resignation or removal. All such officers
shall be subject to removal, with or without cause, at any time by the
affirmative vote of a majority of the whole Board.
ARTICLE V.
Indemnification.
SECTION 1. Right to Indemnification. The Company shall indemnify, defend
and hold harmless any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or other, including
appeals, by reason of the fact that he is or was a director, officer or employee
of the Company, or is or was serving at the request of the Company as a
director, officer or employee of any corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director, officer or employee or in any other capacity while
serving as a director, officer or employee, to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
said Law permitted the Company to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith;
provided, however, that except as provided in Section 2 hereof with respect to
proceedings seeking to enforce rights to indemnification, the Company shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if the proceeding (or
part thereof) was authorized by the Board of Directors of the Company.
The right to indemnification conferred in this Article shall be a contract
right and shall include the right to be paid by the Company expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if required by law at the time of such payment, the payment of
such expenses incurred by a director or officer in his capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the Company of an undertaking,
by or on behalf of such director or officer to repay all amounts so advanced if
it should be determined ultimately that such director or officer is not entitled
to be indemnified under this Section or otherwise.
"Employee." as used herein, includes both an active employee in the
Company's service as well as a retired employee who is or has been a party to a
written agreement under which he might be, or might have been obligated to
render services to the Company.
SECTION 2. Right of Claimant to Bring Suit. If a claim under Section 1 is
not paid in full by the Company within sixty days or, in cases of advances of
expenses, twenty days, after a written claim has been received by the Company,
the claimant may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking has been tendered to the
Company) that the claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the Company to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Company (including its Board
of Directors, independent legal counsel or its stockholders) that the claimant
had not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that claimant had not met the applicable standard
of conduct. The Company shall be precluded from asserting in any judicial
proceeding
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commenced pursuant to this Article that the procedures and presumptions of this
Article are not valid, binding and enforceable and shall stipulate in any such
proceeding that the Company is bound by all the provisions of this Article.
SECTION 3. Non-Exclusivity and Survival. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article (a) shall apply to acts or omissions
antedating the adoption of this by-law, (b) shall be severable, (c) shall not be
exclusive of other rights to which any director, officer or employee may now or
hereafter be entitled, (d) shall continue as to a person who has ceased to be
such director, officer or employee and (e) shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VI.
Capital Stock.
SECTION 1. Form and Execution of Certificates. The certificates of shares
of the capital stock of the Company shall be in such form as shall be approved
by the Board. The certificates shall be signed by the Chairman of the Board, the
President, or a Vice President, and the Secretary or an Assistant Secretary.
SECTION 2. Certificates to be Entered. Certificates shall be consecutively
numbered, and the names of the owners, the number of shares and the date of
issue, shall be entered in the books of the Company.
SECTION 3. Old Certificates to be Canceled. Except in the case of lost or
destroyed certificates, and in that case only upon performance of such
conditions as the Board may prescribe, no new certificate shall be issued in
lieu of a former certificate until such former certificate shall have been
surrendered and canceled.
SECTION 4. Transfer of Shares. Shares shall be transferred only on the
books of the Company by a holder thereof in person or by his attorney appointed
in writing, upon the surrender and cancellation of certificates for a like
number of shares.
SECTION 5. Regulations. The Board may make such rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates of stock of the Company.
SECTION 6. Registrar. The Board may appoint a registrar of transfers and
may require all certificates to bear the signature of such registrar.
SECTION 7. Closing of Transfer Books. If deemed expedient by the Board, the
stock books and transfer books may be closed for the meetings of the
stockholders, or for other purposes, during such periods as from time to time
may be fixed by the Board, and during such periods no stock shall be
transferable on said books.
SECTION 8. Dates of Record. If deemed expedient by the Board, the Directors
may fix in advance, a date, not exceeding 60 days preceding the date of any
meeting of stockholders or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, and in such case only such stockholders
as shall be stockholders of record on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any stock on the books of the
Company after any such record date fixed as aforesaid.
SECTION 9. Rights to Purchase Securities. The Company shall not, without
either the prior approval of a majority of the total number of shares then
issued and outstanding and entitled to vote or the receipt by the Company of a
favorable opinion issued by a nationally recognized investment banking firm
designated by the Committee of Equity Security Holders of Texaco Inc. appointed
in the Company's jointly administered chapter 11 case in the United States
Bankruptcy Court for the Southern District of New York or its last chairman (or
his designee) to the effect that the proposed issuance is fair from a finance
point of view to the stockholders of the Company issue to its stockholders
generally (i) any warrant or other right to purchase any security of the
Company, any successor thereto or any other person or entity or (ii) any
security of the Company containing any such right to purchase, which warrant,
right or security (a) is exercisable, exchangeable or convertible, based or
conditioned in whole or in part on (I) a change of control of the Company or
(II) the owning or holding of any number or percentage of outstanding shares or
voting power or any offer to acquire any number of shares or percentage of
voting power by any entity, individual or group of entities and/or individuals
or (b) discriminates among holders of the same class of securities (or the class
of securities for which such warrant or right is exercisable or exchangeable) of
the Company or any successor thereto. The
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affirmative vote of the holders of at least a majority of the then outstanding
shares of capital stock of the Company voting generally in the election of
Directors, voting together as a single class, shall be required to repeal the
foregoing provisions.
ARTICLE VII
Fair Price.
A. Vote Required for Certain Business Combinations.
1. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or the Certificate of Incorporation, and
except as otherwise expressly provided in Section B of this Article VII:
a. any merger or consolidation of the Company or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder (as
hereinafter defined) or (ii) any other person (whether or not itself an
Interested Stockholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Stockholder or any Affiliate of any Interested
Stockholder of any assets of the Company or any Subsidiary having an
aggregate Fair Market Value of $100 million or more; or
c. the issuance or transfer by the Company or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Company or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $100 million or more; or
d. the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or
e. any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Company or any
Subsidiary which is directly or indirectly owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding shares of capital stock of the Company entitled to
vote generally in the election of Directors (the "Voting Stock"), voting
together as a single class (it being understood that for purposes of this
Article VII, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article IV of the Certificate of Incorporation). Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
2. Definition of "Business Combination". The term "Business
Combination" as used in this Article VII shall mean any transaction
which is referred to in any one or more of clauses (a) through (e) of
paragraph 1 of this Section A.
B. When Higher Vote is Not Required. The provisions of Section A of this
Article VII shall not be applicable to any particular Business Combination, and
such Business Combination shall require only such affirmative vote as is
required by law and any provision of the Certificate of Incorporation, if all of
the conditions specified in either of the following paragraphs 1 and 2 are met:
1. Approval by Disinterested Directors. The Business Combination
shall have been approved by a majority of the Disinterested Directors (as
hereinafter defined).
2. Price and Procedure Requirements. All of the following conditions
shall have been met:
a. The aggregate amount of the cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the higher of the following:
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of Common
Stock acquired by it (a) within the two-year period immediately
prior to the first publication announcement of the proposal of the
Business Combination (the "Announcement Date") or (b) in the
transaction in which it became an Interested Stockholder,
whichever is higher; and
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(ii) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this Article VII as the "Determination Date"),
whichever is higher.
b. The aggregate amount of the cash to be received per share by
holders of shares of any other class of outstanding Voting Stock shall
be at least equal to the highest of the following (it being intended
that the requirements of this paragraph 2b shall be required to be met
with respect to every class of outstanding Voting Stock, whether or not
the Interested Stockholder has previously acquired any shares of a
particular class of Voting Stock):
(i) (if applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by the Interested Stockholder for any shares of such
class of Voting Stock acquired by it (a) within the two-year
period immediately prior to the Announcement Date or (b) in the
transaction in which it became an Interested Stockholder,
whichever is higher;
(ii) (if applicable) the highest preferential amount per share
to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company; and
(iii) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.
c. The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall be in
cash. The price determined in accordance with paragraphs 2a and 2b of
this Section B shall be subject to appropriate adjustment in the event
of any stock dividend, stock split, combination of shares or similar
event.
d. After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination:
(i) except as approved by a majority of the Disinterested Directors,
there shall have been no failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not cumulative) on
the outstanding Preferred Stock; (ii) there shall have been (a) no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested Directors, and
(b) an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has
the effect of reducing the number of outstanding shares of the Common
Stock unless the failure so to increase such annual rate is approved by
a majority of the Disinterested Directors; and (iii) such Interested
Stockholder shall have not become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction
which results in such Interested Stockholder becoming an Interested
Stockholder.
e. After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided by the Company, whether in anticipation of or in connection
with such Business Combination or otherwise.
f. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to public stockholders of the Company at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
C. Vote Required for Certain Stock Repurchases. In addition to any other
requirement of the Certificate of Incorporation, the affirmative vote of the
holders of at least 50% of the Voting Stock (other than Voting Stock
beneficially owned by a Selling Stockholder (as hereinafter defined)), shall be
required before the Company purchases any outstanding shares of Common Stock at
a price above the Market Price (as hereinafter defined) from a person actually
known by the Company to be a Selling Stockholder, unless the purchase is made by
the Company (a) on the same terms and as a result of an offer made generally to
all holders of Common Stock or (b) pursuant to statutory appraisal rights.
D. Certain Definitions. For the purpose of this Article VII:
1. A "person" shall mean any individual, firm, corporation or
other entity.
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2. "Interested Stockholder" shall mean any person (other than the
Company or any Subsidiary) who or which:
a. is the beneficial owner, directly or indirectly, of more
than 20% of the voting power of the outstanding Voting Stock; or
b. is an Affiliate of the Company and at any time within the
two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 20% or more of the voting
power of the then outstanding Voting Stock; or
c. is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period
immediately prior to th e date in question beneficially owned by
any Interested Stockholder, if such assignment or succession shall
have occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the Securities
Act of 1933.
3. A person shall be a "beneficial owner" of any Voting Stock:
a. which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns directly or indirectly; or
b. which such person or any of its Affiliates or Associates
has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding; or
c. which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of Voting Stock.
4. For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph 2 of this Section D, the
number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of paragraph 3 of this
Section D but shall not include any other shares which may be issuable
pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
5. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1988.
6. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Company; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in paragraph 2 of this Section D, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly, by the
Company.
7. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a
Disinterested Director who is unaffiliated with the Interested
Stockholder and is recommended t o succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of Directors.
8. "Fair Market Value" means (a) in the case of the stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for the New York Stock Exchange-Listed Stocks, or, if
such stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed, or, if such stock is not listed
on any such exchange, the highest closing bid quotation with respect to
a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such
quotations are available, the fair market value on the date in question
of a share of such stock as determined by the Board of Directors in
good faith; and (b) in the case of property other than cash or stock,
the fair market value of such property on the date in question as
determined by a majority of the Disinterested Directors.
9. "Selling Stockholder" means any person who or which is the
beneficial owner of in the aggregate more than 1% of the outstanding
shares of Common Stock and who or which has purchased or agreed to
purchase any of such shares within the most recent two-year period and
who sells or proposes to sell Common Stock in a transaction requiring
the affirmative vote provided for in Section C of this Article VII.
* 10 *
<PAGE>
10. "Market Price" means the highest sale price on or during the
period of five trading days immediately preceding the date in question
of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stock, or if such stock is not quoted on the Composite
Tape on the New York Stock Exchange, or, if such stock is not listed on
such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed on any such exchange,
the highest closing bid quotation with respect to a share of stock on
or during the period of five trading days immediately preceding the
date in question on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use, or if no
such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the
Disinterested Directors.
E. Powers of the Board of Directors. A majority of the Directors shall have
the power and duty to determine for the purposes of this Article VII, on the
basis of information known to them after reasonable inquiry, (1) whether a
person is an Interested Stockholder, (2) the number of shares of Voting Stock
beneficially owned by any person, (3) whether a person is an Affiliate or
Associate of another, (4) whether the assets which are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Company or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $100 million or more. A
majority of the Directors shall have the further power to interpret all of the
terms and provisions of this Article VII.
F. No Effect on Fiduciary Obligations of Interested Stockholders. Nothing
contained in this Article VII shall be construed to relieve any Interested
Stockholder from any fiduciary obligation imposed by law.
G. Amendment, Repeal, etc. Notwithstanding any other provisions of the
Certificate of Incorporation or these by-laws (and notwithstanding the fact that
a lesser percentage may be specified by law, the Certificate of Incorporation or
these by-laws) the affirmative vote of the holders of at least a majority of
then outstanding shares of capital stock of the Company voting generally in the
election of Directors, voting together as a single class shall be required to
repeal the foregoing provisions of this Article VII.
ARTICLE VIII.
Seal.
The seal of the Company shall be in circular form containing the name of
the Company around the margin, with a five pointed star in the center embodying
a capital "T".
ARTICLE IX.
By-Law Amendments.
Subject to the provisions of the Certificate of Incorporation, these
by-laws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these by-laws, the Board of Directors may by majority vote of
those present at any meeting at which a quorum is present amend these by-laws,
or enact such other by-laws as in their judgment may be advisable for the
regulation of the conduct of the affairs of the Company.
---------
I, ............R.E.Koch................ Assistant Secretary of Texaco Inc.,
a Delaware corporation, do hereby certify that the above and foregoing is a true
and correct copy of the by-laws of said Company as amended to July 25, 1997
and now in effect.
Dated Harrison, N.Y....August 13.... , 1997 .......R.E.Koch..........
Assistant Secretary
* 11 *
EXHIBIT 4.1
================================================================================
TEXACO CAPITAL INC.
Issuer
and
TEXACO INC.
Guarantor
and
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
as Trustee
-----------
First Supplemental
Indenture
Dated as of January 31, 1990
Supplementing and Restating
The Indenture
Dated as of August 24, 1984
-----------
Providing for issuance of
Guaranteed Debt Securities in Series
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE
<S> <C>
TIA Section Indenture Section
310(a)(1)................................................................. 7.10
(a)(2) ............................................................... 7.10
(a)(3) ............................................................... N.A.
(a)(4) ............................................................... N.A.
(b)................................................................... 7.08; 7.10; 10.02
(c)................................................................... N.A.
311(a) ................................................................... 7.11
(b)................................................................... 7.11
(c)................................................................... N.A.
312(a) ................................................................... 2.08
(b) .................................................................. 10.03
(c)................................................................... 10.03
313(a).................................................................... 7.06
(b)( l ) ............................................................. N.A.
(b)(2) ............................................................... 7.06
(c) .................................................................. 10.02
(d)................................................................... 7.06
314(a).................................................................... 4.07; 10.02
(b)................................................................... N.A.
(c)(l)................................................................ 10.04
(c)(2)................................................................ 10.04
(c)(3)................................................................ N.A.
(d)................................................................... N.A.
(e)................................................................... 10.05
(f)................................................................... N.A.
315(a).................................................................... 7.01 (b)
(b)................................................................... 7.05; 10.02
(c)................................................................... 7.01 (a)
(d)................................................................... 7.01(c)
(e)................................................................... 6.11
316(a) (last sentence).................................................... 2.13
(a)( l )(A)........................................................... 6.05
(a)( l )(B)........................................................... 6.04
(a)(2)................................................................ N.A.
(b)................................................................... 6.07
317(a)(1)................................................................. 6.08
(a)(2)................................................................ 6.09
(b)................................................................... 2.07
318(a).................................................................... 10.01
<FN>
N.A. means Not Applicable.
</FN>
</TABLE>
<PAGE>
i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Section Heading Page
------- ------- ------- ----
1 DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C> <C>
1.01 Definitions................................................................ 1
1.02 Other Definitions.......................................................... 3
1.03 Incorporation by Reference of Trust Indenture Act.......................... 4
1.04 Rules of Construction...................................................... 4
2 THE SECURITIES
2.01 Issuable in Series ........................................................ 4
2.02 Establishment of Terms of Series of Securities ............................ 5
2.03 Unconditional Guarantee ................................................... 6
2.04 Documents Required for Issuance of a Series of Securities ................. 7
2.05 Execution and Authentication .............................................. 8
2.06 Registrar and Paying Agent................................................. 9
2.07 Paying Agent to Hold Money in Trust........................................ 9
2.08 Depositary and Global Security............................................. 9
2.09 Securityholder Lists....................................................... 11
2.10 Transfer and Exchange ..................................................... 11
2.11 Replacement Securities .................................................... 11
2.12 Outstanding Securities .................................................... 12
2.13 Treasury Securities........................................................ 12
2.14 Temporary Securities....................................................... 12
2.15 Cancellation............................................................... 12
2.16 Defaulted Interest......................................................... 13
3 REDEMPTION
3.01 Notice to Trustee.......................................................... 13
3.02 Selection of Securities to be Redeemed..................................... 13
3.03 Notice of Redemption....................................................... 13
3.04 Effect of Notice of Redemption............................................. 14
3.05 Deposit of Redemption Price................................................ 14
3.06 Securities Redeemed in Part................................................ 14
4 COVENANTS
4.01 Certain Definitions........................................................ 14
4.02 Payment of Securities...................................................... 16
4.03 Limitation on Liens........................................................ 16
4.04 Limitation on Sale and Leaseback........................................... 17
4.05 No Lien Created, etc....................................................... 18
4.06 Compliance Certificate..................................................... 18
4.07 SEC Reports................................................................ 18
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Article Section Heading Page
------- ------- ------- ----
5 SUCCESSOR CORPORATION
<S> <C> <C> <C>
5.01 When Company May Merge, etc................................................ 19
5.02 When Securities Must Be Secured. .......................................... 19
6 DEFAULTS AND REMEDIES
6.01 Events of Default ......................................................... 19
6.02 Acceleration .............................................................. 20
6.03 Other Remedies............................................................. 21
6.04 Waiver of Past Defaults.................................................... 21
6.05 Control by Majority........................................................ 21
6.06 Limitation on Suits........................................................ 21
6.07 Rights of Holders to Receive Payment....................................... 22
6.08 Collection Suit by Trustee................................................. 22
6.09 Trustee May File Proofs of Claim........................................... 22
6.10 Priorities................................................................. 22
6.11 Undertaking for Costs...................................................... 23
7 TRUSTEE
7.01 Duties of Trustee.......................................................... 23
7.02 Rights of Trustee.......................................................... 24
7.03 Individual Rights of Trustee............................................... 24
7.04 Trustee's Disclaimer....................................................... 25
7.05 Notice of Defaults......................................................... 25
7.06 Reports by Trustee to Holders ............................................. 25
7.07 Compensation and Indemnity ................................................ 25
7.08 Replacement of Trustee..................................................... 26
7.09 Successor Trustee by Merger, etc........................................... 27
7.10 Eligibility: Disqualification.............................................. 27
7.11 Preferential Collection of Claims Against Company ......................... 27
8 DISCHARGE OF INDENTURE
8.01 Termination of Company's Obligations ...................................... 27
8.02 Application of Trust Money................................................. 28
8.03 Repayment to Company....................................................... 28
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Article Section Heading Page
------- ------- ------- ----
9 AMENDMENTS and WAIVERS
<S> <C> <C> <C>
9.01 Without Consent of Holders................................................. 29
9.02 With Consent of Holders.................................................... 29
9.03 Limitations................................................................ 29
9.04 Compliance with Trust Indenture Act........................................ 30
9.05 Revocation and Effect of Consents.......................................... 30
9.06 Notation on or Exchange of Securities...................................... 30
9.07 Trustee Protected.......................................................... 30
10 MISCELLANEOUS
10.01 Trust Indenture Act Controls............................................... 30
10.02 Notices.................................................................... 30
10.03 Communication by Holders with Other Holders................................ 31
10.04 Certificate and Opinion as to Conditions Precedent......................... 31
10.05 Statements Required in Certificate or Opinion.............................. 32
10.06 Rules by Trustee and Agents................................................ 32
10.07 Legal Holidays............................................................. 32
10.08 Governing Law.............................................................. 32
10.09 No Adverse Interpretation of Other Agreements.............................. 32
10.10 No Recourse Against Others................................................. 32
10.11 Liability Regarding Global Security........................................ 33
10.12 Duplicate Originals........................................................ 33
</TABLE>
SIGNATURES
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE dated as of January 31, 1990, among
TEXACO CAPITAL INC., a Delaware corporation ("company"), TEXACO INC., a Delaware
corporation ("Guarantor") and The Chase Manhattan Bank (National Association),
as Trustee ("Trustee").
RECITALS
The Company, the Guarantor and the Trustee are parties to an Indenture,
dated as of August 24, 1984 (the "Original Indenture"), relating to the issuance
from time to time by the Company of its Debt Securities guaranteed by the
Guarantor on terms to be specified at the time of issuance. Capitalized terms
herein, not otherwise defined, shall have the same meanings given them in the
Original Indenture.
The Company and the Guarantor have requested the Trustee to join with it
in the execution and delivery of this First Supplemental Indenture in order to
provide for the issuance of global Securities in either registered or bearer
form or in either temporary or global form, to provide for the issuance of
Securities in currencies other than Dollars, and to make certain minor
adjustments.
Section 9.01(3) of the Original Indenture provides that a supplemental
indenture may be entered into by the Company, the Guarantor and the Trustee,
without the consent of any Holders of Securities, to add to or change any of the
provisions of the Original Indenture to the extent necessary to make any change
that does not adversely affect the rights of any Securityholder.
The Company and the Guarantor have determined that this First
Supplemental Indenture complies with said Section 9.01 and does not require the
consent of any Holders of Securities. On the basis of the foregoing. the Trustee
has determined that this First Supplemental Indenture is in form satisfactory to
it.
All things necessary to make this First Supplemental Indenture a valid
agreement of the Company, the Guarantor and the Trustee and a valid amendment of
and supplement to the Original Indenture have been done.
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Securities issued under this
Indenture to supplement and restate the Original Indenture in its entirety as
follows:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate' means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or the
Guarantor.
"Agent" means any Authenticating Agent, Paying Agent or Registrar.
"Board of Directors" means, with respect to the Company. the Board
of Directors of the Company or, with respect to the Guarantor, the Board of
Directors or the Executive Committee of the Board of Directors of the Guarantor.
<PAGE>
2
"Board Resolution" means a copy of a resolution certified, with respect
to the Company by the Secretary or an Assistant Secretary of the Company or,
with respect to the Guarantor, by the Secretary or an Assistant Secretary of the
Guarantor, to have been adopted by the Board of Directors of the Company or the
Guarantor and to be in full force and effect on the date of certification and
delivery.
"Company" means the party named as such above until a successor replaces
it and thereafter means the successor.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Depositary" means, with respect to the Securities of any series
issuable or issued in the form of a Global Security, the person designated as
Depositary by the Company pursuant to Section 2.02(14) until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture. and thereafter "Depositary" shall mean or include each person who is
then a Depositary hereunder, and if at any time there is more than one such
person. "Depositary" as used with respect to the Securities of any such series
shall mean the Depositary with respect to the Securities of that series.
"Dollars" means the coin or currency of the United States as at the time
of payment is legal tender for payment of public and private debts.
"ECU" means the European Currency Unit as defined and revised from time
to time by the Council of European Communities.
"Foreign Currency" means a currency issued by the government of a
country other than the United States.
"Global Security" means a Security issued to evidence all or a part of a
series of Securities in accordance with Section 2.02(14).
"Guaranty" means the guarantee of the Company s obligations under a
Security, by the Guarantor, as endorsed on a Security.
"Guarantor" means the party named as such above until a successor
replaces it and thereafter means the successor.
"Holder" or "Securityholder" means a person in whose name a Security is
registered.
"Indenture" means the Original Indenture, as supplemented by this First
Supplemental Indenture, all as may be amended from time to time.
"Officer" means, with respect to either the Company or the Guarantor,
the Chairman of the Board, the Vice Chairman, the President, any Vice President,
the Treasurer, the Comptroller or the Secretary.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and a Deputy, Associate or Assistant Treasurer, Secretary or
Comptroller of the Company or the Guarantor.
<PAGE>
3
"Opinion of Counsel" means a written opinion of legal counsel for the
Company or the Guarantor who may be an Officer or employee of the Company or the
Guarantor.
"Order" means an order signed by two Officers or by any Officer and a
Deputy, Associate or Assistant Treasurer, Secretary or Comptroller of the
Company or the Guarantor directed to the Trustee.
"Original Issue Discount Security" means any Security which provides for
an amount less than the stated principal amount thereof to be due and payable
upon declaration of acceleration of the maturity thereof pursuant to Section
6.02.
"Registered Securities" means Securities which are issued in registered
form without coupons.
"SEC" means the Securities and Exchange Commission.
"Series" or "Series of Securities" means the Series of debt security of
the Company established pursuant to Section 2.02 and authenticated and delivered
under the Indenture.
"Securities" means the debentures, notes or other evidence of
indebtedness of the Company of any Series established pursuant to Section 2.02
and authenticated and delivered under this Indenture.
"TIA" means the Trust Indenture Act of 1939 (IS U.S. Code
ss.ss.77aaa-77bbbb) as in effect on the date shown above.
"Trustee" means the party named as such above until a successor replaces
it and thereafter means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Term Defined In ss.
---- --------------
<S> <C>
"Attributable Debt" 4.01
"Authenticating Agent" 2.05
"Bankruptcy Law" 6.01
"Capital Stock" 4.01
"Consolidated Net Tangible Assets" 4.01
"Custodian" 6.01
"Debt" 4.01
"Event Of Default" 6.01
"Improvements" 4.01
"Legal Holiday" 10.07
"Lien" 4.01
"Long-Term Debt" 4.01
"Outstanding" 2.12
"Paying Agent" 2.06
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
Term Defined In ss.
---- --------------
<S> <C>
"Principal Property 4.01
"Principal Subsidiary" 4.01
"Registrar" 2.06
"Sale-Leaseback Transaction" 4.01
"Subsidiary" 4.01
"United States" 4.01
"U.S. Government Obligations" 8.01
"Voting Stock" 4.01
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and the
Guarantor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings assigned to them.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
1) a term has the meaning assigned to it;
2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles;
3) "or" is not exclusive; and
4) words in the singular include the plural, and in the plural include
the singular.
5) words in the masculine include the feminine, and in the feminine
include the masculine.
<PAGE>
5
ARTICLE 2
THE SECURITIES
SECTION 2.01. Issuable in Series.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited. The Securities may be issued in
one or more Series. All Securities of a Series shall be identical in all
respects except Securities of serial maturities which may differ with respect to
maturity date, interest rate and redemption price. Securities may differ between
Series in respect of any matters. All Series of Securities shall be equally and
ratably entitled to the benefits of this Indenture.
SECTION 2.02. Establishment of Terms of Series of Securities.
At or prior to the issuance of a Series of Securities, there shall be
established by an indenture supplemental hereto, or by a Board Resolution of the
Company or, if the authority has been delegated previously by the Board of
Directors of the Company to an Officer, by an Officers' Certificate of the
Company:
1) the title of the Securities of the Series (which shall distinguish
the Securities of the Series from the Securities of other Series);
2) any limit upon the aggregate principal amount of the Securities of
the Series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of,
other Securities of the series pursuant to Sections 2.10, 2.11 or
2.14);
3) if other than Dollars, the coin or currency in which the Securities
of that series are denominated (including, but not limited to, any
Foreign Currency or ECU);
4) the date or dates on which the principal and the premium, if any,
of the Securities of the Series are payable;
5) if the Securities of the Series are to bear interest, the rate or
rates thereof, the date or dates from which such interest shall
accrue, the dates on which such interest shall be payable and the
record date for the interest payable on any interest payment date or
the method by which such rate or rates or date or dates shall be
determined;
6) the place or places where the principal and the premium and
interest, if any, on the Securities of the Series shall be payable;
7) the period or periods within which, the price or prices at which
and the terms and conditions upon which the Securities of the Series
may be redeemed, in whole or in part, at the option of the Company;
8) the obligation, if any, of the Company to redeem or purchase the
Securities of the Series pursuant to any sinking fund or analogous
provisions or at the option of a Holder and the period or periods
within which, the price or prices at which and the terms and
conditions upon which the Securities of the Series shall be redeemed
or purchased, in whole or in part, pursuant to such obligation;
<PAGE>
6
9) if Registered Securities are to be issued in denominations other
than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Securities of the Series shall be
issuable;
10) if other than the principal amount thereof, the portion of the
principal amount of the Securities of the Series which shall be
payable upon declaration of acceleration of the maturity thereof
pursuant to Section 6.02;
11) if other than the coin or currency in which the Securities of that
series are denominated, the coin or currency in which payment of the
principal of or interest on the Securities of such series shall be
payable;
12) if the principal of or interest on the Securities of such Series are
to be payable, at the election of the Company or a Holder thereof,
in a coin or currency other than that in which the Securities are
denominated, the period or periods within which, and the terms and
conditions upon which, such election may be made;
13) if the amount of payments of principal of and interest on the
Securities of the series may be determined with reference to an
index based on a coin or currency other than that in which the
Securities of the Series are denominated, the manner in which such
amounts shall be determined;
14) whether the Securities of the Series shall be issued in whole or in
part in the form of a Global Security and, in such case, the
Depositary for such Global Security and whether such global form
shall be permanent or temporary;
15) any other terms of the Securities of the Series not inconsistent
with the provisions of this Indenture;
16) the form of the Securities of the Series and the Trustee's
certificate of authentication;
and
17) if other than the Trustee, the name of the trustee, and any Agents.
SECTION 2.03. Unconditional Guarantee.
The Guarantor unconditionally guarantees to each Holder of a Security
and the Trustee, the due and punctual payment of principal and the premium and
interest, if any, on such Security when the same becomes due and payable,
whether at maturity or upon redemption, declaration or otherwise and agrees to
pay the same if the Company fails to do so. The Guarantor's obligations are
absolute and unconditional. The Guarantor shall not be entitled to enforce, or
to receive any payments arising out of or based upon a right of subrogation with
respect to any amounts paid by the Guarantor to the Holder of any Series of
Securities until principal and the premium and interest, if any, on all
Securities of that Series shall have been paid in full or payment provided for.
The Guarantor's guaranty shall be endorsed on all Securities and executed as
herein provided.
<PAGE>
7
SECTION 2.04. Documents Required for Issuance of a Series of Securities.
The Securities of a Series may be executed by the Company and delivered
to the Trustee at any time and the principal amount specified shall be
authenticated by the Trustee and delivered in accordance with an Order of the
Company and the Guarantor upon receipt by the Trustee of the following:
1) an Opinion of Counsel to the effect that: (i) all instruments
furnished the Trustee conform to the requirements of the Indenture
and constitute sufficient authority for the Trustee to authenticate
and deliver the Securities of the Series; (ii) the Company has the
corporate power and authority to issue and deliver the Securities of
the Series; (iii) the issuance and delivery of the Securities of the
Series have been authorized by all requisite corporate action and
the Securities of the Series have been executed and delivered by the
Company; (iv) the Securities of the Series are valid and legally
binding obligations of the Company entitled to the benefits of the
Indenture equally and ratably with all other Securities theretofore
issued and then outstanding under the Indenture and are enforceable
against the Company in accordance with their terms except as
enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in
general; and (v) the amount of Securities then Outstanding under the
Indenture, including the Series of Securities being issued, will not
exceed the amount at the time permitted by law;
2) an Opinion of Counsel for the Guarantor to the effect that: (i) the
Guarantor has the corporate power and authority to execute and
deliver the Guaranties and to undertake the obligations set forth in
the Guaranty; (ii) the Guaranties endorsed on the Securities have
been duly authorized by all requisite corporate action and have been
endorsed on the Securities by the Guarantor; and (iii) the
Guaranties endorsed on the Series of Securities are valid and
legally binding obligations of the Guarantor entitled to the
benefits provided by the Indenture equally and ratably with all
other Guaranties theretofore executed and delivered and then
outstanding under the Indenture and enforceable against the
Guarantor in accordance with their terms except as enforceability
may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights in general;
3) an Officers' Certificate of the Company stating that the Company is
not in default under the Indenture and that the execution and
delivery of the Series of Securities will not conflict with or
result in a violation of the Certificate of Incorporation or By-Laws
of the Company or of any agreement, instrument, order, writ,
judgment or decree to which the Company is a party or is subject;
and that all conditions precedent provided in the Indenture relating
to the execution and delivery of the Series of Securities have been
complied with;
<PAGE>
8
4) an Officers' Certificate of the Guarantor stating that the Guarantor
is not in default under this Indenture and that the execution and
delivery of the Guaranties will not conflict with or result in a
violation of the Certificate of Incorporation or By-Laws of the
Guarantor or of any agreement, instrument, order, writ, judgment or
decree to which the Guarantor is a party or is subject; and that all
conditions precedent provided in the Indenture relating to the
execution and delivery of the Guaranties have been complied with;
5) a certified copy of a Board Resolution of the Company, an Officers'
Certificate of the Company or an executed copy of a supplemental
indenture, as required by Section 2.02, establishing the terms of
the Securities of the Series; and
6) such other documents as the Trustee may reasonably require.
The Trustee shall have the right to decline to authenticate and deliver
any Securities under this section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken by the Company; or if the
Trustee in good faith by action of its board of directors, or board of trustees,
executive committee, or a trust committee of directors or trustees or Trust
Officers determines that such action would expose the Trustee to personal
liability to existing Holders.
SECTION 2.05. Execution and Authentication.
Securities shall be executed by two Officers for the Company and
Guaranties shall be executed by an Officer for the Guarantor. Signatures shall
be facsimile or manual.
If the person whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall be valid
nevertheless.
The Trustee may appoint an authenticating agent ("Authenticating Agent")
to authenticate Securities. An Authenticating Agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Agent.
A Security or a Guaranty shall not be valid until the Security is
authenticated by the manual signature of the Trustee or an Authenticating Agent.
The manual signature shall be conclusive evidence that the Security has been
authenticated under this Indenture. Each Security shall be dated the date of its
authentication.
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9
SECTION 2.06. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Registered Securities may be presented for payment
("Paying Agent"). The Registrar shall keep a separate register with respect to
each Series of Registered Securities and of their transfers and exchanges. The
Company may appoint one or more co-registrars and one or more additional paying
agents for each Series of Registered Securities. The term "Registrar" includes
any co-registrar and the term "Paying Agent" includes any additional paying
agent. The Company shall notify the Trustee of the name and address of any
Registrar or Paying Agent not a party to this Indenture. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent.
SECTION 2.07. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent, other than the Trustee, to
agree in writing that the Paying Agent will hold in trust, for the benefit of
Holders of a Series of Securities or the Trustee, all money held by the Paying
Agent for the payment of principal and the premium and interest, if any, on the
Series of Securities, and will notify the Trustee of any default by the Company
in making any such payment. If the Company acts as Paying Agent, it shall
segregate the money and hold it as a separate trust fund. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee. Upon
doing so the Paying Agent shall have no further liability for the money.
SECTION 2.08. Depositary and Global Security.
If the Company shall establish Securities of a series to be issued in
the form of one or more Global Securities, then (i) the aggregate principal
amount Outstanding of such series shall be represented by one or more Global
Securities; (ii) the Global Security shall be registered in the name of the
Depositary for such Global Security or the nominee of such Depositary; (iii) the
Global Security shall be delivered by the Trustee to such Depositary or pursuant
to such Depositary's instruction and (iv) the Global Security shall bear a
legend substantially to the following effect: "UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF A NOMINEE OF SUCH DEPOSITARY OR SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY
PAYMENT IS MADE TO A NOMINEE OF SUCH DEPOSITARY, ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
DEPOSITARY, AS REGISTERED OWNER HEREOF, HAS AN INTEREST HEREIN."
Each Depositary designated for a Global Security must, at the time of
its designation and at all times while it serves as Depositary, be a clearing
agency registered under the Securities Exchange Act of 1934 and any other
applicable statute or regulation.
If at any time the Depositary for the Global Securities of a series
notifies the Company that it is unwilling or unable to continue as Depositary or
if at any time the Depositary shall no longer be eligible under this Section
2.08, the Company shall appoint a successor Depositary
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10
with respect to the Securities for such series. If a successor Depositary for
the Securities of such series is not appointed by the Company within 90 days
after the Company receives such notice or becomes aware of such ineligibility,
the Company's election to issue that series of Securities in the form of a
Global Security shall no longer be effective with respect to the Securities for
such series and the Company will execute, and the Trustee, upon receipt of an
Order for the authentication and delivery of definitive Securities of such
series, will authenticate and deliver Securities of such series in definitive
form in an aggregate principal amount equal to the principal amount of the
Global Security representing such series in exchange for such Global Security.
The Company may at any time and in its sole discretion determine that
the Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by such Global Security. In such event the
Company will execute, and the Trustee, upon receipt of an Order for the
authentication and delivery of definitive Securities of such series, will
authenticate and deliver, Securities of such series in definitive form and in an
aggregate principal amount equal to the principal amount of the Global Security
representing such series in exchange for such Global Security.
If specified by the Company pursuant to Section 2.02 with respect to a
series of Securities, the Depositary for such series of Securities may surrender
a Global Security for such series of Securities in exchange in whole or in part
for Securities of such series of like tenor and terms and definitive form on
such terms are acceptable to the Company and such Depositary. Thereupon the
Company shall execute, and the Trustee shall authenticate and deliver, without
service charge, (i) to each person specified by such Depositary a new Security
of the same series, of like tenor and terms and of any authorized denomination
as requested by such person in aggregate principal amount equal to and in
exchange for such person's beneficial interest in the Global Security; and (ii)
to such Depositary a new Global Security of like tenor and terms and in a
denomination equal to the difference, if any, between the principal amount of
the surrendered Global Security and the aggregate principal amount of Securities
delivered to Holders thereof.
In any exchange provided for in any of the preceding paragraphs, the
Company will execute and the Trustee will authenticate and deliver Securities in
definitive registered form in authorized denominations without charge and the
Trustee shall authenticate and deliver, in exchange for each portion of such
Global Security, an equal aggregate principal amount of definitive Registered
Securities of the same series of authorized denominations and of like tenor and
terms as the portion of such temporary Global Security to be exchanged. Upon any
exchange of a part of such Global Security for definitive Registered Securities,
the portion of the principal amount and any interest thereon so exchanged shall
be endorsed on a schedule to such temporary Global Security, whereupon the
principal amount and interest payable with respect to such Global Security shall
be reduced for all purposes by the amount so exchanged and endorsed.
SECTION 2.09. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders of each Series of Securities. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee on or before each
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11
interest payment date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Securityholders of each Securities of a
Series.
SECTION 2.10. Transfer and Exchange.
Where Registered Securities of a Series are presented to the Registrar
with a request to register transfer or to exchange them for an equal principal
amount of Registered Securities of the same Series and date of maturity of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit transfers and
exchanges, the Trustee shall authenticate Securities at the Registrar's request.
The Company may charge a reasonable fee for any transfer or exchange but not for
any exchange pursuant to Sections 2.14, 3.06 or 9.06.
SECTION 2.11. Replacement Securities.
If the Holder of a Security claims that the Security has been lost,
mutilated, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security of the same Series amount and
date of maturity if the Trustee's requirements are met. If required, an
indemnity bond must be provided by the Holder sufficient in the judgment of the
Company and the Trustee to protect the Company, the Guarantor, the Trustee and
the Agent from any loss which any of them may suffer if a Security is replaced.
The Company may charge for its expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company
and of the Guarantor.
SECTION 2.12. Outstanding Securities.
Securities of a Series outstanding ("Outstanding") at any time are all
of the Securities of the Series authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation, and those described in
this Section.
If a Security is replaced pursuant to Section 2.11, it ceases to be
Outstanding until the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds on a redemption date or maturity date money
sufficient to pay Securities of a Series payable on that date, then on and after
that date such Securities of the Series cease to be Outstanding and interest on
them ceases to accrue.
A Security does not cease to be Outstanding because the Company or an
Affiliate holds the Security.
SECTION 2.13. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities of a Series have concurred in any direction, waiver or consent.
Securities of a Series owned by the Company, the Guarantor or a Subsidiary shall
be disregarded, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or
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12
consent, only Securities of a Series which the Trustee knows are so owned shall
be so disregarded.
SECTION 2.14. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare temporary Securities, the Guarantor may endorse its Guaranties thereon
and the Trustee shall authenticate such temporary Securities. Temporary
Securities and Guaranties shall be substantially in the form of definitive
Securities and Guaranties but may have variations that the Company and the
Guarantor consider appropriate for temporary Securities and Guaranties. Without
unreasonable delay, the Company and the Guarantor shall prepare and the Trustee
shall authenticate definitive Securities of the same Series and date of maturity
with appropriate Guaranties in exchange for temporary Securities.
SECTION 2.15. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee shall cancel all Securities surrendered for transfer, exchange, payment,
redemption or cancellation and shall dispose of canceled Securities as the
Company directs. The Company may not issue new Securities to replace Securities
that it has paid or delivered to the Trustee for cancellation.
SECTION 2.16. Defaulted Interest.
If the Company defaults in a payment of interest on a Series of
Securities, it shall pay the defaulted interest, plus any interest payable on
the defaulted interest, to the persons who are Securityholders of the Series on
a subsequent special record date. The Company shall fix the record date and
payment date. At least 15 days before the record date, the Company shall mail to
the Trustee and to each Securityholder of the Series a notice that states the
record date, the payment date and the amount of interest to be paid. The Company
may pay defaulted interest in any other lawful manner.
ARTICLE 3
REDEMPTION
SECTION 3.01. Notice to Trustee.
The Company may, with respect to any Series of Securities, reserve the
right to redeem and pay the Series of Securities before maturity at such time
and on such terms as provided for when the Series of Securities were issued. If
a Series of Securities is redeemable and the Company wants to redeem all or part
of the Series of Securities pursuant to the terms under which the Series of
Securities were issued, it shall notify the Trustee of the redemption date and
the principal amount of Series of Securities to be redeemed. The Company shall
give the notice at least 60 days before the redemption date unless shorter
notice is acceptable to the Trustee.
SECTION 3.02. Selection of Securities to be Redeemed.
In the event of a redemption of less than all the Securities of a
Series, the Trustee shall select the Securities of the Series to be redeemed by
a method the Trustee considers fair and appropriate. The Trustee shall make the
selection from Securities of the Series Outstanding. The
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13
Trustee may select for redemption portions of the principal of Securities of the
Series that have denominations larger than $1,000. Securities of the Series and
portions of them it selects shall be in amounts of $1,000 or multiples of
$1,000. Provisions of this Indenture that apply to Securities of a Series called
for redemption also apply to portions of Securities of that Series called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail a notice of redemption by first-class mail to each Holder of
the Series of Securities to be redeemed.
The notice shall identify the Securities of the Series to be redeemed
(and, in the case of partial redemption, the principal amounts thereof) and
shall state:
1) the redemption date;
2) the redemption price;
3) the name and address of the Paying Agent;
4) that Securities of the Series called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
and
5) that interest on Securities of the Series called for redemption
ceases to accrue on and after the redemption date.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities of a Series called for
redemption become due and payable on the redemption date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price plus accrued interest to the redemption date, except that if
the redemption date is an interest payment date, interest shall be paid to the
Holder registered as such on the applicable record date.
SECTION 3.05. Deposit of Redemption Price.
On or before the redemption date, the Company shall deposit with the
Paying Agent money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee shall
authenticate for the Holder a new Security of the same Series, the same maturity
and interest rate equal in principal amount to the unredeemed portion of the
Security surrendered.
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14
ARTICLE 4
COVENANTS
SECTION 4.01. Certain Definitions.
"Attributable Debt" for a Sale-Leaseback Transaction means, as of the
date of determination, the lesser of (a) the fair value of the property subject
to the transaction (as determined by the Board of Directors of the Guarantor) or
(b) the present value of rent for the remaining term of the lease. Rent shall be
discounted to present value at the average of the rates borne by all of the
Series of Securities that have been guaranteed compounded semiannually. Rent is
the lesser of (a) rent for the remaining term of the lease assuming it is not
terminated or (b) rent from the date of determination until the first possible
termination date plus the termination payment then due, if any. The remaining
term of a lease includes any period for which the lease has been extended. Rent
does not include (i) amounts for maintenance, repairs, insurance, taxes,
assessments and similar charges or (ii) contingent rent, such as that based on
sales. Rent may be reduced by rent that any sublessee must pay from the date of
determination for all or part of the same property.
"Capital Stock" means the shares of the common or preferred stock of a
Principal Subsidiary.
"Consolidated Net Tangible Assets" means the total amount of Guarantor's
assets (less applicable reserves and other properly deductible items) after
deducting therefrom: (i) all current liabilities (excluding any which are, by
their terms, extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is being
computed) and (ii) all good will, trade names, trademarks, patents, unamortized
debt discount and expense and other like intangible assets, as reflected in the
Guarantor's most recent consolidated balance sheet computed in accordance with
generally accepted accounting principles preceding the date of a determination
under Section 4.03.
"Debt" means any debt for borrowed money or any guarantee of such a
debt.
"Improvements" means any exploration, drilling, development,
construction, alteration, repair or improvement conducted, performed, installed
or located on a Principal Property.
"Lien" means any mortgage, pledge, charge, encumbrance, security
interest or lien; except such term shall not include a mortgage, pledge or
security interest in favor of the United States or any state or political
subdivision of either, or any department, agency or instrumentality of either;
sales, reservations or other depositions of rights to receive a specified part
of the oil, gas or other minerals to be recovered at specified locations or a
specified amount of moneys, however determined or any other interest in property
of the character commonly referred to as or similar to a production payment.
"Long-Term Debt" means Debt that by its terms matures on a date more
than one year after the date it was incurred or Debt that the obligor may extend
or renew without the obligee's consent to a date more than one year after the
date the Debt was incurred.
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15
"Principal Property" means any oil or gas producing property located in
the United States, onshore or offshore, or any refinery or manufacturing plant
located in the United States, in each case now owned or hereafter acquired by
the Guarantor or a Principal Subsidiary, except any property, refinery or plant
that in the opinion of the Board of Directors of the Guarantor is not of
material importance to the total business conducted by the Guarantor and its
consolidated Subsidiaries.
"Principal Subsidiary" means a Subsidiary that has substantially all of
its assets located, and conducts substantially all of its operations in the
United States, owns a Principal Property and in which the Guarantor's direct or
indirect net investment exceeds $100,000,000.
"Sale-Leaseback Transaction" means an arrangement (other than an
arrangement made for the purposes of Section 168(f)(8) of the Internal Revenue
Code) with any bank, insurance company or other lender or investor (collectively
"lenders") or to which the lender is a party where the Guarantor or a Principal
Subsidiary now owns or hereafter acquires a Principal Property, transfers it to
a lender, or to any person to whom funds have been or are to be advanced by a
lender on the security of such Principal Property or the rental payments under
the lease, and leases it back from the lender or other person.
"Subsidiary" means a corporation a majority of whose Voting Stock is
owned by the Guarantor or a Subsidiary.
"United States" means the United States of America. Territories and
possessions are not part of the United States.
"Voting Stock" means the Capital Stock having voting power under
ordinary circumstances to elect directors of a corporation.
SECTION 4.02. Payment of Securities.
The Company shall pay principal and the premium and interest, if any, on
the Securities on the dates and in the manner provided in the Securities. An
installment of principal, or premium or interest, if any, on a Security shall be
considered paid on the date it is due if the Trustee or Paying Agent holds on
that date money designated for and sufficient to pay the same.
The Company shall pay interest on overdue principal at the rate borne by
the Securities; it shall pay interest on overdue installments of premium and
interest, if any, at the same rate to the extent lawful.
SECTION 4.03. Limitation on Liens.
The Guarantor shall not, and it shall not permit any Principal
Subsidiary to, incur a Lien to secure a Long-Term Debt on a Principal Property,
or any Capital Stock or Long-Term Debt of a Principal Subsidiary unless:
1) the Lien equally and ratably secures the Securities and the
Long-Term Debt. The Lien may equally and ratably secure the
Securities and any other obligation of the Guarantor or a
Subsidiary;
2) the Lien is in existence at the time the corporation merges into
or consolidates with the Guarantor or a Principal Subsidiary or
becomes a Principal Subsidiary;
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16
3) the Lien is on a Principal Property at the time the Guarantor or a
Principal Subsidiary acquires the Principal Property;
4) the Lien secures Long-Term Debt incurred to finance all or some of
the purchase price of a Principal Property of the Guarantor or a
Principal Subsidiary. The Long-Term Debt secured by the Lien may be
incurred prior to, at the time of, or within 90 days after the
acquisition, of the Principal Property subject to the Lien;
5) the Lien secures Long-Term Debt incurred to finance all or some of
the cost of Improvements on a Principal Property of the Guarantor
or a Principal Subsidiary. The Long-Term Debt secured by the Lien
may be incurred prior to, at the time of, or within 90 days after
completion, of the Improvements;
6) the Lien secures Long-Term Debt of a Principal Subsidiary owing to
the Guarantor or to another Principal Subsidiary;
7) the Lien extends, renews or replaces in whole or in part a Lien
permitted by any of clauses (1) through (6).
or
8) the Long-Term Debt plus all other Long-Term Debt secured by Liens on
Principal Properties, Capital Stock or Long-Term Debt of a Principal
Subsidiary at the time does not exceed 10% of Guarantor's
Consolidated Net Tangible Assets. However, Long-Term Debt secured by
a Lien permitted by any of clauses (1) through (7) shall be excluded
from all other Long-Term Debt in the determination. Attributable
Debt for any lease permitted by clause (4) of Section 4.04 shall be
included in the determination and treated as Long-Term Debt secured
by a Lien on a Principal Property not otherwise permitted by any of
clauses (1) through (7)
SECTION 4.04. Limitation on Sale and Leaseback.
The Guarantor shall not, and it shall not permit any Principal
Subsidiary to, enter into a Sale-Leaseback Transaction unless:
1) the lease has a term of three years or less;
2) the lease is between the Guarantor and a Principal Subsidiary or
between Principal Subsidiaries;
3) the Guarantor or a Principal Subsidiary under any of clauses (2)
through (6) of Section 4.03 could create a Lien on the Principal
Property to secure a Long-Term Debt at least equal in amount to the
Attributable Debt for the lease;
4) the Guarantor or a Principal Subsidiary under clause (8) of Section
4.03 could create a Lien on the Principal Property to secure a
Long-Term Debt at least equal in amount to the Attributable Debt for
the lease;
or
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17
5) the Guarantor or a Principal Subsidiary within 120 days of the
effective date of the Sale-Leaseback Transaction (i) retires
Long-Term Debt of the Guarantor or of a Principal Subsidiary at
least equal in amount to the fair value (as determined by the Board
of Directors of the Guarantor) of the Principal Property at the time
of the Sale-Leaseback Transaction or (ii) if the net proceeds of the
Sale-Leaseback Transaction equal or exceed the fair value of the
Principal Property (as determined by the Board of Directors of the
Guarantor), applies the net proceeds to fund investment in other
Principal Properties which investments were made within twelve
months prior to or subsequent to the Sale-Leaseback Transaction.
SECTION 4.05. No Lien Created, etc.
This Indenture, the Securities and the Guaranties do not create a Lien
on any property of the Guarantor or any Principal Subsidiary.
Long-Term Debt or Attributable Debt shall be counted only once even if
more than one person is responsible for the obligation.
SECTION 4.06. Compliance Certificate.
The Company and the Guarantor shall each deliver to the Trustee within
120 days after the end of the calendar year in which the first Series of
Securities is issued and each year thereafter an Officers' Certificate stating
whether or not the signers know of any Default that occurred during such year.
If they do, the Officers' Certificate shall describe the Default and its status.
SECTION 4.07. SEC Reports.
The Guarantor shall file with the Trustee, within 15 days after it files
them with the SEC, copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Guarantor is
required to file with the SEC pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. The Guarantor also shall comply with the other provisions
of TIA ss.314(a).
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, etc.
Neither the Guarantor nor the Company shall consolidate or merge into,
or transfer its properties and assets substantially as an entirety to another
person unless the person assumes by supplemental indenture all the obligations
of the Company or the Guarantor under the Securities and this Indenture and
immediately after the transaction no Default exists. Thereafter all such
obligations of the Company or the Guarantor shall terminate.
SECTION 5.02. When Securities Must Be Secured.
If upon a consolidation, merger or transfer, a Principal Property, or
Capital Stock or Long-Term Debt of the Guarantor or a Principal Subsidiary would
become subject to an attaching Lien that secures Long-Term Debt, then before the
consolidation, merger or transfer occurs the Guarantor by supplemental indenture
shall secure the Securities by a direct Lien on the Principal
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18
Property, Capital Stock or Long-Term Debt. However, the Company and the
Guarantor need not comply with this Section if:
1) upon the consolidation, merger or transfer the attaching Lien
will secure the Securities equally and ratably with Long-Term Debt
secured by the attaching Lien; or
2) the Guarantor or a Principal Subsidiary under any of clauses (2)
through (8) of Section 4.03 could create a Lien on the Principal
Property, Capital Stock or Long-Term Debt to secure Long-Term Debt
at least equal in amount to that secured by the attaching Lien.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs with respect to the Securities of any
Series if:
1) the Company defaults in the payment of interest on any Security of
that Series when the same becomes due and payable and the Default
continues for a period of 30 days;
2) the Company defaults in the payment of principal or the premium, if
any, or in the making of any sinking fund payments on any Security
of that Series when the same becomes due and payable at maturity,
upon redemption or otherwise;
3) the Company or the Guarantor fails to comply with any of its other
agreements applicable to the Securities of that Series, this
Indenture or any supplemental indenture under which the Securities
may have been issued, and the Default continues for the period and
after the notice specified below;
4) the Company or the Guarantor pursuant to or within the meaning of
any Bankruptcy Law:
A) commences a voluntary case,
B) consents to the entry of an order for relief against it in
an involuntary case,
C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
D) makes a general assignment for the benefit of its creditors:
or
5) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
A) is for relief against the Company or the Guarantor in an
involuntary case,
B) appoints a Custodian of the Company or the Guarantor or for
all or substantially all of the Company's or the Guarantor's
property, or
C) orders the liquidation of the Company or the Guarantor and
the order or decree remains unstayed and in effect for
90 days.
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The term "Bankruptcy Law" means title 11, U.S. Code or any similar law
for the relief of debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.
A Default under clause (3) is not an Event of Default until the Trustee
or the Holders of at least 25% in principal amount of all of the Securities of
that Series Outstanding notify the Company of the Default and the Company or the
Guarantor, as the case may be, does not cure the Default within 90 days after
receipt of the notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default.'
SECTION 6.02. Acceleration.
If an Event of Default occurs and is continuing, with respect to the
Securities of any Series, the Trustee by notice to the Company, or the Holders
of at least 25% in principal amount of all of the Securities of that Series
Outstanding by notice to the Company and the Trustee, may declare the principal
and the premium and accrued interest, if any, on all the Securities of that
Series to be due and payable immediately. Upon such a declaration, such
principal and the premium and interest, if any (or, if the Securities of that
Series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that Series), on the Securities of
that Series shall be due and payable immediately. The Holders of a majority in
principal amount of all of the Securities of that Series Outstanding, by notice
to the Trustee, may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction and if all existing Events of Default have been cured or
waived except nonpayment of principal or premium or interest, if any, that has
become due solely because of the acceleration.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing with respect to the
Securities of any Series, the Trustee may pursue any available remedy by
proceeding at law or in equity to collect the payment of principal and the
premium and interest, if any, on the Securities of the Series that is in default
or to enforce the performance of any provision of such Securities or this
Indenture with respect to such Series of Securities.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults.
Subject to Section 9.03, the Holders of a majority in principal amount
of all the Securities of a Series Outstanding by notice to the Trustee may waive
an existing Default and its consequences with respect to the Securities of that
Series.
SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount of all the Securities of a
Series Outstanding may direct the time, method and place of conducting any
proceeding for any remedy available
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20
to the Trustee or exercising any trust or power conferred on it with respect to
the Securities of such Series. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture, that is unduly prejudicial
to the rights of another Securityholder, or that would involve the Trustee in
personal liability.
SECTION 6.06. Limitation on Suits.
A Holder of a Security may pursue a remedy with respect to the Security
or this Indenture as it applies to such Security only
if:
1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
2) the Holders of at least 25% in principal amount of the Securities
of the Series Outstanding make a written request to the Trustee to
pursue the remedy;
3) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
5) during such 60-day period the Holders of a majority in principal
amount of the Securities of the Series Outstanding do not give the
Trustee a direction inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over the other
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal and the premium and
interest, if any, on the Security, on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or the Guarantor for the whole amount of
principal and the premium and interest, if any, remaining unpaid.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
Securityholders allowed in any judicial proceedings relative to the Company, the
Guarantor, their creditors or their property.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article with respect
to any Series of Securities it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
<PAGE>
21
Second: to Securityholders for amounts due and unpaid on the Securities
of such Series for principal and the premium and interest, if any, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Securities of such Series for principal and the premium and
interest, if any, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under any Series
of Securities or this Indenture with respect to any Series of Securities or in
any suit against the Trustee for any action taken or omitted by it as Trustee, a
court in its discretion may require the filing by any party litigant in the suit
of an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys' fees, against any
party litigant in the suit, having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit
by Holders of more than 10% in principal amount of the Securities of a Series
Outstanding.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
a) If an Event of Default has occurred and is continuing with respect
to the Securities of a Series, as to that Series, the Trustee shall
exercise its rights and powers and use the same degree of care and
skill in its exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
b) Except during the continuance of an Event of Default:
1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates Or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements
of this Indenture.
c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
1) This paragraph does not limit the effect of paragraph (b)
of this Section.
2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the
pertinent facts.
<PAGE>
22
3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 6.05.
d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
e) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any
loss, liability or expense.
f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree with the Company and the
Guarantor. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
SECTION 7.02. Rights of Trustee.
a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the
document.
b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith
in reliance on the Certificate or Opinion.
c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.
d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its
rights or powers.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company, the Guarantor
or an Affiliate with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or any Securities issued hereunder, it shall not be accountable
for the Company's use of the proceeds from any Securities, and it shall not be
responsible for any statement in any Securities other than its authentication.
SECTION 7.05. Notice of Defaults.
If a Default occurs and is continuing with respect to any Series of
Securities and if it is known to the Trustee, the Trustee shall mail to each
Securityholder of that Series notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment of principal, premium or
interest on any Security of a Series, the Trustee may withhold the notice if and
so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders of that Series.
<PAGE>
23
SECTION 7.06. Reports by Trustee to Holders.
On or before December 15 in every year after the first Series of
Securities is issued hereunder, so long as any Securities are Outstanding
hereunder, the Trustee shall mail to each Securityholder a brief report dated as
of the preceding October 15 that complies with TIA ss.313(a). The Trustee also
shall comply with TIA ss.313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange on which the Securities are
listed.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred by it. Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company agrees to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of the Trust or Trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder.
The Company need not reimburse any expense or indemnify against any loss
or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee, except that held in trust to pay principal and the
premium and interest, if any, on particular Securities.
SECTION 7.08. Replacement of Trustee.
A Trustee may resign with respect to the Securities of one or more
Series by notifying the Company. The Holders of a majority in principal amount
of the Securities of any Series Outstanding may remove a Trustee with respect to
that Series by notifying the removed Trustee and the Company and may appoint a
successor Trustee for that Series of Securities with the Company's consent. The
Company may remove a Trustee with respect to Securities of one or more Series
if:
1) a Trustee fails to comply with Section 7.10;
2) a Trustee is adjudged a bankrupt or an insolvent;
3) a receiver or public officer takes charge of a Trustee or its
property; or
4) a Trustee becomes incapable of acting.
If a Trustee resigns or is removed or if a vacancy exists in the office
of Trustee with respect to any Series of Securities for any reason, the Company
shall promptly appoint a successor Trustee for that Series of Securities.
<PAGE>
24
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount Outstanding of the affected Series of
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee with respect to such Series of Securities.
If the Trustee fails to comply with Section 7.10, any Holder of a
Security may petition any court of competent jurisdiction for the removal of the
Trustee with respect to the Series of Securities and the appointment of a
successor Trustee.
A successor Trustee with respect to a Series of Securities shall deliver
a written acceptance of its appointment to the retiring Trustee and to the
Company. Immediately after that, the retiring Trustee shall transfer all
property held by it as Trustee with respect to the Series of Securities to the
successor Trustee with respect to the Series of Securities subject to the lien
provided for in Section 7.07, the resignation or removal of the retiring Trustee
with respect to the Series of Securities shall become effective, and the
successor Trustee with respect to such Series of Securities shall have all the
rights, powers and duties of the Trustee with respect to such Series of
Securities under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder of the Series of Securities.
SECTION 7.09. Successor Trustee by Merger, etc.
If a Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust assets to, another corporation, the
successor corporation without any further act shall be a successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
A Trustee under this Indenture with respect to each Series of Securities
shall always satisfy the requirements of TIA ss.310(a)(1). The Trustee with
respect to each Series of Securities shall always have a combined capital and
surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition. The Trustee with respect to each Series of Securities is
subject to TIA ss.310(b), including the optional provision permitted by the
second sentence of TIA ss.310(b)(9), provided, that there shall be excluded from
the operation of TIA ss.310(b) as incorporated by this paragraph the Indenture
dated as of April 1, 1976, under which the Guarantor's 8 1/2% Debentures Due
2006 are outstanding, the Indenture dated as of April 30, 1988, under which the
Guarantor's 7 1/4% Serial Debentures due March 1, 1989/1998 are outstanding, and
the Indenture dated as of June 27, 1983, as supplemented by a Supplemental
Indenture dated as of July 10, 1984, under which the Company's Extendible Notes
due 1999 and 13-5/8% Notes due 1994 are outstanding.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee with respect to each Series of Securities is subject to TIA
ss.311(a), excluding any creditor relationship listed in TIA ss.311(b). A
Trustee who has resigned or been removed with respect to any Series of
Securities shall be subject to TIA ss.311(a) to the extent indicated.
<PAGE>
25
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.
The Company may terminate its obligations with respect to any Series of
Securities, on the terms and subject to the conditions contained in this
Indenture, by depositing in trust with the Trustee money or U.S. Government
Obligations sufficient to pay principal, premium and interest, if any, on such
Series to redemption or maturity, provided that the Company shall deliver to the
Trustee an Opinion of Counsel based on the fact that (x) the Issuer has received
from, or there has been published by, the Internal Revenue Service a ruling or
(y) since the date hereof, there has been a change in the applicable Federal
income tax law, in either case to the effect that, and such opinion shall
confirm that, the Holders of the Securities of such Series will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to Federal income tax on
the same amount and in the same manner and at the same times, as would have been
the case if such deposit, defeasance and discharge had not occurred; and the
Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent provided for relating to the
defeasance contemplated by this provision have been complied with. Upon the
termination of the Company's obligations with respect to all the Securities of a
Series, the Trustee, at the request of the Company, shall release its rights and
interests with respect to such Series of Securities in any security granted by
the Company.
The Company's obligations in Sections 2.06, 2.07, 2.08, 2.09, 2.10,
7.07, 7.08 and 8.03 with respect to any Series of Securities shall survive until
all the Securities of that Series are no longer Outstanding. Thereafter, the
Company's obligations in Sections 7.07 and 8.03 shall survive.
"U.S. Government Obligations" means direct or indirect obligations of
the United States of America for the payment of which the full faith and credit
of the United States of America is pledged.
SECTION 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment as provided for in Section 8.01.
SECTION 8.03. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any money and any U.S. Government Obligations held by them not required
for the payment of the principal and the premium and interest, if any, at any
time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money herd' by them for the payment of principal and the premium and
interest. if any, that remains unclaimed for two years after such payment has
become due and payable. After that,
<PAGE>
26
Securityholders entitled to the money must look to the Company for payment as
general creditors unless an abandoned property law designates another person.
ARTICLE 9
AMENDMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company, the Guarantor and the Trustee may enter into a supplemental
indenture to amend a Series of Securities or this Indenture with respect to a
Series of Securities without the consent of any Securityholder:
1) to cure any ambiguity, defect or inconsistency;
2) to comply with Section 5.01;
3) to make any change that does not adversely affect the rights of any
Securityholder; or
4) to provide for an issue of and to establish the terms and
conditions of a Series of Securities.
SECTION 9.02. With Consent of Holders.
Subject to Section 9.03, the Company, the Guarantor and the Trustee may
enter into a supplemental indenture to amend a Series of Securities or this
Indenture with respect to a Series of Securities with the written consent of the
Holders of at least 50.1% in principal amount of the Securities of the Series
affected Outstanding. The Holders of 50.1% in principal amount of the Securities
of the affected Series Outstanding by notice to the Trustee may waive compliance
by the Company or the Guarantor with any provision of this Indenture or the
Securities of the affected Series.
SECTION 9.03. Limitations.
Without the consent of each Securityholder of a Series of Securities
affected, an amendment or waiver may not:
1) reduce the amount of Securities whose Holders must consent to an
amendment or waiver;
2) reduce the rate of or extend the time for payment of interest on
any Security;
3) reduce the principal, or premium or extend the fixed maturity of,
any Security;
4) waive a default, if any, in the payment of principal or the premium
or interest, if any, on any Security; or
5) make any Security payable in money other than that stated in the
Security.
SECTION 9.04. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities of any Series shall
be set forth in a supplement to the Indenture that complies with the TIA as then
in effect.
<PAGE>
27
SECTION 9.05. Revocation and Effect Of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security if the Trustee receives the
notice of revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, it shall bind every
Securityholder unless it makes a change described in clause (2), (3), (4) or (5)
of Section 9.03. In that case the amendment or waiver shall bind each Holder of
a Security who has consented to it and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder s
Security.
SECTION 9.06. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment or
waiver on any Security thereafter authenticated. The Company in exchange for
Securities may issue, the Guarantor may endorse Guaranties thereon and the
Trustee shall authenticate new Securities that reflect the amendment or waiver.
SECTION 9.07. Trustee Protected.
The Trustee need not sign any supplement to the Indenture that adversely
affects its rights.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
SECTION 10.02. Notices.
Any notice or communication by the Company, the Guarantor or the Trustee
to any of the others is duly given if in writing and delivered in person or
mailed by first-class mail:
if to the Company:
32 Loockerman Square, Suite L-100
Dover, Delaware 19901
(with a copy to the Guarantor at its address below)
if to the Guarantor:
Texaco Inc.
2000 Westchester Avenue
White Plains, NY 10650
Attention: Treasurer
<PAGE>
28
if to the Trustee:
The Chase Manhattan Bank (National Association), as Trustee
I New York Plaza
New York, New York 10081
Attention: Corporate Trust Administration Division
The Company, the Guarantor or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder's address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it, provided that notice to the Trustee, the Company and the Guarantor
shall be effective only upon receipt.
SECTION 10.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss.312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Guarantor, the Trustee, the Registrar and anyone
else shall have the protection of TIA ss.312(c).
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
1) an Officers' Certificate of the Company stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with; and
2) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
1) a statement that the person making such certificate or opinion has
read such covenant or condition;
2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in
such certificate or opinion are based;
3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
<PAGE>
29
4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. Legal Holidays.
Unless otherwise specified with respect to a Series of Securities, a
"Legal Holiday" is a Saturday, a Sunday, a legal holiday or a day on which
banking institutions are not required to be open in New York City. If a payment
date is a Legal Holiday at a place of payment, payment may be made at the place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 10.08. Governing Law.
The laws of the State of New York shall govern this Indenture and the
Securities.
SECTION 10.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, the Guarantor or a Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 10.10. No Recourse Against Others.
All liability described in the Securities of any director, officer,
employee or stockholder, as such, of the Company or the Guarantor is waived and
released.
SECTION 10.11. Liability Regarding Global Security.
None of the Company, the Guarantor, the Trustee, any Paying Agent or the
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
<PAGE>
30
SECTION 10.12. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
TEXACO CAPITAL INC.
(SEAL)
By: R.W. Ulrich
-------------------------------
Vice President
Attest:
R.E. Koch
- -----------------------------------
Assistant Secretary
TEXACO INC.
(SEAL)
By: David C. Crikelair
-------------------------------
Treasurer
Attest:
R.E. Koch
- -----------------------------------
Assistant Secretary
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as TRUSTEE
(SEAL)
By: A.K. Crain
-------------------------------
Second Vice President
Attest:
Nancy Morreale
- -----------------------------------
Assistant Secretary
EXHIBIT 4.1(a)
This First Supplement to the First Supplemental Indenture, dated as of
October 11, 1990, among Texaco Capital Inc., a Delaware corporation (the
"Company"), Texaco Inc., a Delaware corporation (the "Guarantor") and The Chase
Manhattan Bank (National Association), as Trustee (the "Trustee").
RECITALS
The Company, the Guarantor and the Trustee are parties to a First
Supplemental Indenture dated as of January 31, 1990, supplementing and restating
an Indenture dated as of August 24, 1984, (the "Supplemental Indenture"),
relating to the issuance from time to time by the Company of its Debt Securities
guaranteed by the Guarantor on terms to be specified at the time of issuance.
Capitalized terms herein, not otherwise defined, shall have the same meanings
given them in the Supplemental Indenture.
The Company and the Guarantor have requested the Trustee to join with
it in the execution and delivery of this First Supplement to the Supplemental
Indenture in order to provide for limitations on the maturities of certain
Securities.
Section 9.01 (3) of the Supplemental Indenture provides that a
Supplemental Indenture may be entered into by the Company, the Guarantor and the
Trustee, without the consent of any Holders of Securities, to amend the
Supplemental Indenture to the extent necessary to make any change that does not
adversely affect the rights of any Securityholder.
The Company and the Guarantor have determined that this First
Supplement to the Supplemental Indenture complies with said Section 9.01 and
does not require the consent of any Securityholder. On the basis of the
foregoing, the Trustee has determined that this First Supplement to the
Supplemental Indenture is in form satisfactory to it.
All things necessary to make this First Supplement to the Supplemental
Indenture a valid agreement of the Company, the Guarantor and the Trustee and a
valid supplement to the Supplemental Indenture have been done.
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Securities issued under
the Supplemental Indenture as follows:
<PAGE>
ARTICLE I
COVENANT
Section 1.01
With respect to any Securities issued pursuant to the Prospectus Supplement
dated October 11, 1990, to the Propectus dated February 28, 1990, and under the
terms of a Distribution Agreement dated as of October 11, 1990 among the
Company, the Guarantor, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc,
and The First Boston Corporation, the Company agrees that it shall not issue
more than $300,000,000 in aggregate principal amount of Securities having a
maturity of more than four years; the Officers of the Company acting with
respect to the issuance of any such Securities shall make the determination at
the time of issuance that the Notes have been issued in accordance with the
foregoing limitation; and the delivery of an Order to the Trustee shall be
deemed to be conclusive evidence that the provisions of this First Supplement to
the Supplemental Indenture have been complied with.
ARTICLE II
GENERAL
Section 2.01
Except as supplemented herein, the Supplemental Indenture shall remain in full
force and effect as written.
<PAGE>
Section 2.02. Duplicate Originals.
The parties may sign any number of copies of this First Supplement to the
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
(seal) TEXACO CAPITAL INC.
By: R. W. Ulrich
-----------------------
Vice President
Attest:
R. E. Koch
- -----------------------
Assistant Secretary
TEXACO INC.
By: David C. Crikelair
-----------------------
Treasurer
(seal)
Attest:
R. E. Koch
- -----------------------
Assistant Secretary
THE CHASE MANHATTAN BANK
(National Association)
As Trustee
By: R. J. Hollerin
-----------------------
Second Vice President
(seal)
Attest:
Mary Jo Clarke
- -----------------------
Assistant Secretary
p:\lg07mhr\indent90.doc
EXHIBIT 4.1(B)
SECOND SUPPLEMENT TO THE FIRST SUPPLEMENTAL INDENTURE, dated as of
August 5, 1997, among TEXACO CAPITAL INC., a Delaware corporation (the
"Company"), TEXACO INC., a Delaware corporation (the "Guarantor"), and THE CHASE
MANHATTAN BANK, as Trustee (the "Trustee").
RECITALS
The Company, the Guarantor and the Trustee are parties to a First
Supplemental Indenture dated as of January 31, 1990, supplementing and restating
an Indenture dated as of August 24, 1984, (the "Supplemental Indenture"),
relating to the issuance from time to time by the Company of its Debt Securities
guaranteed by the Guarantor on terms to be specified at the time of issuance.
The Company, the Guarantor and the Trustee entered into a First
Supplement to the Supplemental Indenture on October 11, 1990.
The Company and the Guarantor have requested the Trustee to join with
it in the execution and delivery of this Second Supplement to the Supplemental
Indenture solely in order to establish the terms of a Series of Securities to be
designated "3.50% Guaranteed Cash-Settled Convertible Notes Due 2004".
Section 2.02 of the Supplemental Indenture provides that the terms of a
Series of Securities may be established by an indenture supplemental thereto.
Section 9.01(3) of the Supplemental Indenture provides that an
indenture supplemental thereto may be entered into by the Company, the Guarantor
and the Trustee, without the consent of any Holders of Securities, to amend the
Supplemental Indenture to the extent necessary to make any change that does not
adversely affect the rights of any Securityholder.
The Company and the Guarantor have determined that this Second
Supplement to the Supplemental Indenture complies with said Section 9.01 and
does not require the consent of any Securityholder. On the basis of the
foregoing, the Trustee has determined that this Second Supplement to the
Supplemental Indenture is in form satisfactory to it.
All things necessary to make this Second Supplement to the Supplemental
Indenture a valid agreement of the Company, the Guarantor and the Trustee and a
valid supplement to the Supplemental Indenture have been done.
<PAGE>
(NY) /dpw/cw/031/06216/029/FORM/inden.supp.wpd
Each party agrees as follows for the benefit of the other parties
hereto and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.
Capitalized terms herein, not otherwise defined, shall have the same
meanings given them in the Supplemental Indenture.
"Agency Agreement" means the Agency Agreement of even date herewith
among the Company, the Guarantor, the Trustee, the Principal Paying Agent, the
Principal Conversion Agent, the Paying Agent in Luxembourg, the Conversion Agent
in Luxembourg and the Calculation Agent.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banking institutions or trust companies in The City of New York, the
City of London or Luxembourg are authorized or obligated by law or executive
order to close.
"Conversion Amount" shall have the meaning specified in the Notes.
"Conversion Date" shall have the meaning specified in the Notes.
"CSFP" means Credit Suisse Financial Products.
"Exchange Date" shall have the meaning specified in paragraph 6 the
Temporary Global Note.
"Holder" or "Securityholder" of any Note or Coupon shall mean, for
purposes hereof and, solely with respect to the Notes, for purposes of the
Supplemental Indenture, the bearer thereof.
"Interest Payment Date" shall have the meaning specified in the Notes.
"Legal Holiday" means, for purposes of the Supplemental Indenture,
solely with respect to the Notes, any day that is not a Business Day.
"Non-U.S. Paying Agent" means the Principal Paying Agent and any other
Paying Agent for the Notes outside the United States.
2
<PAGE>
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Calculation Agent" 5.04
"Cedel Bank" 3.02
"Common Depositary" 3.02
"Conversion Agent" 5.01
"Coupon" 3.04
"Definitive Note" 3.04
"Euroclear Operator" 3.02
"Exchange Request" 3.04
"Notes" 2.01
"Permanent Global Note" 3.03
"Principal Conversion Agent" 5.01
"Principal Paying Agent" 4.01
"Temporary Global Note" 3.02
"United States" 3.06
</TABLE>
ARTICLE 2
ESTABLISHMENT OF TERMS OF NOTES
SECTION 2.01. Establishment of Terms of Notes.
Pursuant to Section 2.02 of the Supplemental Indenture, there is hereby
established a Series of Securities designated the "3.50% Guaranteed Cash-Settled
Convertible Notes Due 2004" (the "Notes") with the terms set forth herein and in
the Notes. The Notes are limited to an aggregate principal amount of
U.S.$200,000,000. The terms set forth herein to establish the Notes shall not
affect any other series of Securities issued under the Supplemental Indenture
and the Supplemental Indenture shall remain in full force and effect and, except
as otherwise expressly provided herein, shall govern the terms of the Notes.
3
<PAGE>
ARTICLE 3
FORM, DENOMINATION, TRANSFER AND EXCHANGE
SECTION 3.01. Form and Denomination; Transfer.
Except as provided herein, the Notes shall be issued in bearer form,
serially numbered, in denominations of U.S.$10,000. Title to the Notes and
Coupons will be transferable by delivery. Except as provided herein, the Company
and any Agent may deem and treat the bearer of any Note or Coupon as the
absolute owner thereof (whether or not overdue and notwithstanding any notice of
ownership or writing thereon or notice of any previous loss or theft thereof)
for all purposes.
SECTION 3.02. Initial Form and Delivery.
The Notes shall be initially issued in temporary global bearer form,
without interest coupons, in substantially the same form as set forth in Exhibit
A-1 hereto (the "Temporary Global Note"). The Temporary Global Note shall be
delivered to the Brussels office of a common depositary (the "Common
Depositary") for the benefit of Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System (the "Euroclear Operator"),
and Cedel Bank, societe anonyme ("Cedel Bank"), for credit to the account
designated by or on behalf of the initial subscriber thereof.
SECTION 3.03. Exchange of Temporary Global Note for Permanent
Global Note.
An interest in the Temporary Global Note shall be exchanged for an
interest in a Note in permanent global bearer form, without interest coupons, in
substantially the same form as set forth in Exhibit A-2 hereto (the "Permanent
Global Note"), on or after the Exchange Date, upon the occurrence of each of the
following events:
(i) the account holder having beneficial ownership of such
interest instructs the Euroclear Operator or Cedel Bank, as the case
may be, to request such exchange on its behalf and delivers to the
Euroclear Operator or Cedel Bank, as the case may be, a certificate in
the form set forth in Exhibit 1 to the Temporary Global Note, dated no
earlier than 10 days prior to the Exchange Date, copies of which
completed certificate shall be made available by the Euroclear Operator
or Cedel Bank, as the case may be, to the Principal Paying Agent, which
will make such certificate available to the Trustee; and
4
<PAGE>
(ii) on or after the Exchange Date, the Common Depositary
surrenders the Temporary Global Note to the Principal Paying Agent to
be exchanged, in whole or from time to time in part, for an interest in
the Permanent Global Note; provided, however, that, upon such
presentation by the Common Depositary, the Temporary Global Note shall
be accompanied by (i) a certificate dated on or after the Exchange Date
and signed by the Euroclear Operator as to the portion of the Temporary
Global Note held for its account then to be exchanged and (ii) a
certificate dated on or after the Exchange Date and signed by Cedel
Bank as to the portion of the Temporary Global Note held for its
account then to be exchanged, each in the form set forth in Exhibit 2
to the Temporary Global Note.
Without unnecessary delay but, in any event, not later than the Exchange Date,
the Company shall deliver to the Principal Paying Agent the Permanent Global
Note. Upon the first occurrence of the events specified in paragraphs (i) and
(ii) above, the Principal Paying Agent shall authenticate and deliver to the
Common Depositary, in exchange for the portion of the Temporary Global Note
being surrendered, the Permanent Global Note, in a principal amount equal to the
aggregate principal amount of the Temporary Global Note so surrendered. The
Principal Paying Agent shall endorse the Temporary Global Note to reflect a
reduction in the principal amount equal to the principal amount thereupon
represented by the Permanent Global Note and shall, after such endorsement,
redeliver the Temporary Global Note to the Common Depositary. Upon any
subsequent occurrence of the events specified in paragraph (i) and (ii) above,
and upon surrender to the Principal Paying Agent of the Temporary Global Note to
be exchanged and the Permanent Global Note, the Principal Paying Agent shall
endorse the Temporary Global Note to reflect a reduction in the principal amount
equal to the portion to be exchanged, and the Principal Paying Agent shall
endorse the Permanent Global Note so as to increase the principal amount thereof
by an amount equal to the portion being exchanged and shall thereupon redeliver
the Permanent Global Note and the Temporary Global Note to the Common
Depositary. At such time as the principal amount of the Temporary Global Note
shall have been reduced to zero, the Trustee shall cancel the Temporary Global
Note in accordance with Section 2.15 of the Supplemental Indenture. In each of
the foregoing cases, the Euroclear Operator or Cedel Bank, as the case may be,
shall then credit the portion of the Permanent Global Note being exchanged to
the respective accounts of the beneficial owners of the portion of the Temporary
Global Note so surrendered (or to such other accounts as such beneficial owners
may direct).
5
<PAGE>
SECTION 3.04. Exchange of Permanent Global Note for Definitive Notes.
The beneficial owner of an interest in the Permanent Global Note is
entitled to exchange such interest for Notes in definitive bearer form, serially
numbered, with interest coupons ("Coupons") attached, substantially in the form
set forth in Exhibit A-3 hereto ("Definitive Notes"), in denominations of
U.S. $10,000 and in an aggregate principal amount equal to the amount of such
beneficial interest, upon the occurrence of the following events:
(i) the account holder having beneficial ownership of such
interest instructs the Euroclear Operator or Cedel Bank, as the case
may be, to request such exchange on its behalf and delivers to any
Non-U.S. Paying Agent (which Non-U.S. Paying Agent shall deliver such
request to the Trustee and the Company), through the Euroclear Operator
or Cedel Bank, as the case may be, at least 30 days' written notice of
such exchange, which notice specifies the number of Definitive Notes
into which such interest shall be exchanged (each an "Exchange
Request"); and
(ii) on or after the earliest date on which such interests may
be exchanged, the Common Depositary surrenders the Permanent Global
Note to the Principal Paying Agent to be exchanged in whole for
Definitive Notes.
All (but not less than all) interests in the Permanent Global Note
shall be so exchanged for one or more Definitive Notes (i) upon receipt by the
Company of a copy of an Exchange Request from the first beneficial owner of an
interest in the Permanent Global Note to make such an Exchange Request or (ii)
upon receipt by the Principal Paying Agent and the Trustee of a notice from the
Company stating that (x) the Permanent Global Note has been accelerated
following an Event of Default or (y) the Euroclear Operator or Cedel Bank has
been closed for business for a continuous period of fourteen days (other than by
reason of public holidays) or has announced its intention to cease business
permanently or in fact has done so. The Company shall, promptly upon delivery of
any such notice to the Principal Paying Agent and the Trustee, cause the Common
Depositary (i) to instruct the Principal Paying Agent and the Company regarding
the aggregate principal amount of Definitive Notes that must be authenticated
and delivered to each relevant clearing system in exchange for the Permanent
Global Note and (ii) to surrender the Permanent Global Note to the Principal
Paying Agent to be exchanged in whole for Definitive Notes.
As soon as practicable after either (i) receiving a copy of an Exchange
Request from a Non-U.S. Paying Agent or (ii) delivering to the Principal Paying
6
<PAGE>
Agent and the Trustee such a notice of acceleration of the Permanent Global Note
or of closure of a relevant clearing system, the Company shall deliver to the
Principal Paying Agent Definitive Notes in authorized denominations equal in
aggregate principal amount to the principal amount of the Permanent Global Note.
Upon receiving an Exchange Notice or such a notice from the Company and the
Permanent Global Note from the Common Depositary, the Principal Paying Agent
shall authenticate and deliver to the Euroclear Operator or Cedel Bank, as the
case may be, in exchange for each portion of the Permanent Global Note, such
Definitive Notes. The Euroclear Operator or Cedel Bank, as the case may be,
shall then deliver such Definitive Notes (A) in the case of an exchange
initiated by an Exchange Request, (x) to the beneficial owner (or to such person
as the beneficial owner may direct) of the portion of the Permanent Global Note
with respect to which the Exchange Request was submitted and (y) to the
Euroclear Operator and Cedel Bank, as the case may be, for the account of the
beneficial owners of all remaining interests in the Permanent Global Note in
accordance with their interests, or (B) in the case of an exchange following a
notice of acceleration of the Permanent Global Note or of closure of a relevant
clearing system, to the beneficial owners of all the interests in the Permanent
Global Note in accordance with their interests.
SECTION 3.05. No Exchange in Certain Circumstances.
None of the Company, the Trustee and any Non-U.S. Paying Agent will be
required to exchange Notes to be redeemed during the period of 15 calendar days
preceding the first publication of notice of redemption.
SECTION 3.06. No Delivery into the United States.
No Definitive Note or Coupon delivered in exchange for a portion of the
Permanent Global Note shall be mailed or otherwise delivered to any location in
the United States. The term "United States" means the United States of America
(including the States and the District of Columbia) and its "possessions", which
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
SECTION 3.07. Principal Paying Agent Shall be Authenticating Agent.
The Principal Paying Agent shall be an Authenticating Agent.
7
<PAGE>
ARTICLE 4
PAYMENTS OF PRINCIPAL AND INTEREST
SECTION 4.01. Appointment of Paying Agents.
The Company initially appoints the Trustee, at its office in London at
Trinity Tower, 9 Thomas More Street, London E19YT, England, as the principal
Paying Agent for the Notes outside the United States (the "Principal Paying
Agent"). The Company initially appoints Chase Manhattan Bank Luxembourg S.A., at
its office in Luxembourg at 5 rue Plaetis, L-2338 Luxembourg, Luxembourg, as a
Paying Agent in Luxembourg. So long as the Notes are listed on the Luxembourg
Stock Exchange and the rules of such exchange so require, the Company shall
maintain a Paying Agent in Luxembourg.
SECTION 4.02. Payments on Global Notes.
Principal and interest payable on the Temporary Global Note or the
Permanent Global Note shall be payable to the Euroclear Operator and Cedel Bank
for credit to the respective accounts of the beneficial owners of the Temporary
Global Note or the Permanent Global Note, as the case may be, provided, however,
that in the case of the Temporary Global Note, (a) payment of such principal and
interest to the Euroclear Operator or Cedel Bank, as the case may be, is
conditioned upon the delivery by the Euroclear Operator or Cedel Bank, as the
case may be, to the Principal Paying Agent of a certificate or certificates
substantially in the form set forth in Exhibit 2 to the Temporary Global Note
and (b) credit of the applicable portion of such principal and interest to the
account of a beneficial owner of the Temporary Global Note is conditioned upon
the delivery by such beneficial owner to the Euroclear Operator or Cedel Bank,
as the case may be, of a certificate dated no earlier than the applicable
payment date, in the form set forth in Exhibit 1 to the Temporary Global Note.
Notwithstanding anything to the contrary herein contained, the certifications
made pursuant to this Section shall satisfy the certification requirements of
Section 3.03 hereof and the interests of the beneficial owners of the Temporary
Global Note with respect to which such certification was made will be exchanged,
without further act or deed by such beneficial owners, for interests in the
Permanent Global Note on the Exchange Date or the date of certification if such
date occurs after the Exchange Date. Except as otherwise provided in this
Section, no payments of principal or interest owing with respect to a beneficial
interest in the Temporary Global Note will be made to the beneficial owner
thereof unless and until such interest shall have been exchanged for an interest
in the Permanent Global Note. Any principal or interest received by the
Euroclear Operator and Cedel Bank in respect of the Temporary Global Note or the
Permanent Global
8
<PAGE>
Note and not paid as herein provided shall be returned to the
Trustee prior to the expiration of two years after the date of such payment in
order to be repaid to the Company in accordance with Section 8.03 of the
Supplemental Indenture.
SECTION 4.03. Payments on Definitive Notes.
Payment of principal and interest on a Definitive Note will be made in
immediately available funds, subject to any applicable laws and regulations,
only against presentation and surrender of such Definitive Note or the relevant
Coupon, as the case may be, at the office outside the United States of any
Non-U.S. Paying Agent by check or, at the option of the Holder, by wire transfer
of immediately available funds to an account maintained by the payee with a bank
located outside the United States if appropriate wire transfer instructions have
been received by such Non-U.S. Paying Agent not less than 15 calendar days prior
to an applicable payment date.
SECTION 4.04. No Service Charge.
No service charge shall be made for any exchange of Notes, except that
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.
ARTICLE 5
CONVERSION AND REDEMPTION
SECTION 5.01. Appointment of Conversion Agents.
The Company initially appoints the Trustee, at its office in London at
Trinity Tower, 9 Thomas More Street, London E19YT, England, as a conversion
agent (a "Conversion Agent") and the principal Conversion Agent for the Notes
outside the United States (the "Principal Conversion Agent"). The Company
initially appoints Chase Manhattan Bank Luxembourg S.A., at its office in
Luxembourg at 5 rue Plaetis, L-2338 Luxembourg, Luxembourg, as a Conversion
Agent in Luxembourg. Each Conversion Agent shall be deemed a Paying Agent for
purposes of the Supplemental Indenture solely as it relates to the Notes. So
long as the Notes are listed on the Luxembourg Stock Exchange and the rules of
such exchange so require, the Company shall maintain a Conversion Agent in
Luxembourg.
9
<PAGE>
SECTION 5.02. Conversion.
The Notes shall be convertible into cash as provided therein.
Each Conversion Agent shall accept, on or before 5:00 P.M., London
time, on any Business Day at its specified office, delivery of Conversion
Notices and any Notes (including unmatured Coupons relating thereto) being
surrendered for conversion, and will provide the person delivering any such
Notes with a receipt therefor, and, in the event that an Interest Payment Date
will fall on the next Business Day following delivery of such Conversion Notice
and such Notes, a separate receipt representing the Coupon that would be
redeemable on such Interest Payment Date. Any Conversion Notice delivered to a
Conversion Agent after 5:00 P.M., London time, on any Business Day shall be
deemed to have been delivered on the immediately succeeding Business Day. Each
Conversion Agent other than the Principal Conversion Agent shall, immediately
upon receipt of a Conversion Notice delivered to it as aforesaid (and in any
event not later than 5:00 P.M., London time, on the Business Day delivered to
it), send a copy of such Conversion Notice and the Notes (including all
unmatured Coupons relating thereto) being surrendered for conversion by
facsimile to the Principal Conversion Agent.
In respect of all valid Conversion Notices received on any Business Day
(any determination as to whether a Conversion Notice is valid and has been
properly and completely delivered as provided in the Notes shall be made by (i)
the Principal Conversion Agent after consultation with the Euroclear Operator or
Cedel Bank, as the case may be, if the Notes are represented by the Permanent
Global Note or by Definitive Notes that are held by the Euroclear Operator or
Cedel Bank or (ii) the Principal Conversion Agent if the Notes are represented
by Definitive Notes not held by the Euroclear Operator or Cedel Bank, and shall,
in either of cases (i) or (ii), absent manifest error, be conclusive and binding
on the Company and the relevant Holder), the Principal Conversion Agent shall:
(i) prior to 4:30 P.M. (London time) on the Business Day
immediately following the day on which a Conversion Agent receives such
Conversion Notices, notify the Calculation Agent, the Company and, if
CSFP is no longer acting in its capacity as Calculation Agent
hereunder, CSFP by facsimile (which notification to the Calculation
Agent shall be preceded by oral notification) of the following
information with respect to the valid Conversion Notices received by it
on the relevant Business Day;
(1) the name of each Holder delivering a Conversion
Notice to each Conversion Agent;
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<PAGE>
(2) the principal amount of Notes being converted by
each such Holder at each Conversion Agent and the aggregate
principal amount of all Notes being converted by all Holders
at each Conversion Agent; and
(3) the relevant Conversion Date;
(ii) confirm with the Euroclear Operator or Cedel Bank, if the
relevant Notes are represented by the Permanent Global Note or by
Definitive Notes held by the Euroclear Operator or Cedel Bank, the
principal amount of Notes to which a Conversion Notice relates and the
details of the account from which the Notes are to be debited;
(iii) arrange for the payment of the Conversion Amount in
accordance with the instructions contained in the Conversion Notice;
and
(iv) carry out such other acts as may be necessary to give
effect to the provisions of the Notes.
On the next Business Day following a Conversion Date, the Calculation
Agent shall provide written notice to the Company, the Trustee and the Principal
Conversion Agent of the Conversion Amount to be delivered to all the converting
Holders by each Conversion Agent and the related Settlement Date. Upon the
occurrence of an event requiring an adjustment to the calculation of the
Conversion Amount as set forth in the Notes, the Calculation Agent will promptly
notify the Company and the Principal Conversion Agent, which in turn will notify
the Holders, of such event and of the method of calculation to be used to make
any such adjustment. So long as the Notes are listed on the Luxembourg Stock
Exchange, the Calculation Agent will also notify the Luxembourg Stock Exchange
with respect to any such adjustment.
SECTION 5.03. Conversion Notices.
Each Conversion Agent shall make available, and promptly upon request
provide to any Holder, notices substantially in the form set forth in Exhibit B
hereto (or such other form as shall be provided by the Company with the approval
of the Principal Conversion Agent, which approval shall not be unreasonably
withheld or delayed), and at the same time notify such Holder of any additional
certifications or restrictions that may be notified to the Principal Conversion
Agent by the Company.
11
<PAGE>
SECTION 5.04. Calculation Agent.
The Company initially appoints CSFP as calculation agent (the
"Calculation Agent") with respect to the Notes. All determinations or
calculations made by the Calculation Agent shall be made without taking account
of the interests of the Holders and without liability on its part (other than as
provided in the Agency Agreement) and shall, in the absence of manifest error,
be conclusive for all purposes and binding on the Company, the Agents and the
Holders.
SECTION 5.05. Optional Redemption.
The Notes shall be redeemable at the option of the Company in the
manner set forth therein. Notwithstanding Section 3.03 of the Supplemental
Indenture, the Company may give notice of an optional redemption pursuant to
this Section at least 15 but not more than 30 days before the date fixed for
redemption.
SECTION 5.06. Tax Redemption; Withholding.
The Notes shall be redeemable upon the occurrence of certain events in
the manner set forth therein and in Article 3 of the Supplemental Indenture.
If the Company is, in respect of any payment in respect of the Notes,
compelled to withhold or deduct any amount for or on account of any taxes or to
pay additional amounts in respect thereof or elects to withhold or deduct any
amount for or on account of a backup withholding tax or similar charge or elects
to pay additional amounts in respect thereof, in either case as provided in the
Notes, the Company shall give notice to the Trustee and each Non-U.S. Paying
Agent (with a copy to the Calculation Agent) as soon as it makes such election
or becomes aware of the requirement to make the withholding or deduction or to
pay such additional amounts, as the case may be, and shall give to each of the
Trustee and each Non-U.S. Paying Agent such information as it shall require to
enable it to comply with the requirement.
12
<PAGE>
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Notices.
Notices to Holders will be given by publication in a newspaper in the
English language of general circulation in the City of London or, if publication
in London is not practical, in an English language newspaper with general
circulation in Western Europe. Notwithstanding the foregoing, so long as the
Notes are represented by the Temporary Global Note or the Permanent Global Note
and such Note is held on behalf of the Euroclear Operator or Cedel Bank, any
such notice may, at the Company's option in lieu of such publication, be given
by delivery to the Euroclear Operator or Cedel Bank, as the case may be, in
which event such notice shall be deemed to have been given to the Holders on the
seventh business day in Brussels or Luxembourg, as the case may be, after the
day on which such notice is so delivered. So long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so
require, notice to the Holders will also be published in English in a leading
newspaper having general circulation in Luxembourg, or, if such Luxembourg
publication is not practicable, in one other leading English language daily
newspaper with general circulation in Europe, such newspaper being published on
each Business Day in morning editions, whether or not it shall be published in
Saturday, Sunday or holiday editions. Except as set forth above, notices shall
be deemed to have been given on the date of publication as aforesaid or, if
published on different dates, on the date of the first such publication.
Notices to Cedel Bank shall be given to it at Cedel Bank, societe
anonyme, 67 Boulevard Grande-Duchesse Charlotte, Luxembourg-Ville, L-1010
Luxembourg, Attention: OCE Department, Telex: 2791.
Notices to the Euroclear Operator shall be given to it at Morgan
Guaranty Trust Company of New York (as operator of the Euroclear
System),Brussels office, Boulevard Emile Jacqmain 151, B-1210 Brussels, Belgium,
Attention: Custody Processing Department, Telex: 61025 MGTEC B.
Notices to the Principal Paying Agent and the Principal Conversion
Agent shall be given to it at The Chase Manhattan Bank, Trinity Tower, Thomas
More Street, London E19YT, England, Attention: Manager, Global Trust Operations,
Fax: 44 1202 34 7945, Telex: 8954681 CMBG.
Notices to the Paying Agent and the Conversion Agent in Luxembourg
shall be given to it at Chase Manhattan Bank Luxembourg S.A., 5 rue Plaetis, L-
13
<PAGE>
2338 Luxembourg, Luxembourg, Attention: Manager, Global Trust Operations, Fax:
352 4626 85380, Telex: 1233 CHASLU.
Notices to the Luxembourg Stock Exchange shall be given to it c/o
Banque Internationale a Luxembourg S.A., 69, route d'Esch, L-1470 Luxembourg,
Luxembourg, attention: Jacques Kinnen, Fax: 352 4590 4227.
Notices to the Calculation Agent (and in the event that CSFP is no
longer Calculation Agent, CSFP) shall be given to it c/o CSFP Capital, Inc.,
Eleven Madison Avenue, New York, N.Y. 10010, attention: Ricardo Harewood/
Sharmila Ruder, Fax: (212) 325-8174.
SECTION 6.02. Securityholder Lists.
The provisions of Section 2.09 of the Supplemental Indenture shall not
apply to the Notes.
SECTION 6.03. Collection Suit by Trustee; Trustee May File Proofs of
Claim.
All rights of action and of asserting claims under the Notes or any
Coupons or under the Supplemental Indenture, with respect to the Notes, may be
enforced by the Trustee without the possession of any of the Notes or Coupons or
the production thereof on any trial or other proceedings relative thereto.
SECTION 6.04. Evidence of Action Taken by Securityholders.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by the Notes or the Supplemental Indenture, with
respect to the Notes, to be given or taken by a specified percentage in
principal amount of the Securityholders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by such specified
percentage of Securityholders in person or by agent duly appointed in writing
and, except as otherwise expressly provided in the Supplemental Indenture, such
action shall become effective when such instrument or instruments are delivered
to the Trustee. Proof of execution of any instrument or of a writing appointing
any such agent shall be sufficient for any purpose of the Supplemental
Indenture, with respect to the Notes, and (subject to Sections 7.01 and 7.02 of
the Supplemental Indenture) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
14
<PAGE>
SECTION 6.05. Proof of Execution of Instruments and of Holding of
Securities.
Subject to Sections 7.01 and 7.02 of the Supplemental Indenture, the
execution of any instrument by a Securityholder or its agent or proxy may be
proved in the following manner. The fact and date of the execution by any Holder
of any instrument may be proved by the certificate of any notary public or other
officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the person executing such instruments acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or other such officer. Where such execution is by or
on behalf of any legal entity other than an individual, such certificate or
affidavit shall also constitute sufficient proof of the authority of the person
executing the same. The fact of the holding by any Holder of a Note, and the
identifying number of such Note and the date of its holding the same, may be
proved by the production of such Note or by a certificate executed by any trust
company, bank, banker or recognized securities dealer wherever situated
satisfactory to the Trustee, if such certificate shall be deemed by the Trustee
to be satisfactory. Each such certificate shall be dated and shall state that on
the date thereof a Note bearing a specified identifying number was deposited
with or exhibited to such trust company, bank, banker or recognized securities
dealer by the person named in such certificate. Any such certificate may be
issued in respect of one or more Notes. The holding by the person named in any
such certificate of any Notes specified therein shall be presumed to continue
for a period of one year from the date of such certificate unless at the time of
any determination of such holding (i) another certificate bearing a later date
issued in respect of the same Notes shall be produced, (ii) the Notes specified
in such certificate shall be produced by some other person, or (iii) the Notes
specified in such certificate shall have ceased to be Outstanding. Subject to
Sections 7.01 and 7.02 of the Supplemental Indenture, the fact and date of the
execution of any such instrument and the amount and numbers of Notes held by the
person so executing such instrument and the amount and numbers of Notes may also
be proven in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in any other manner that the Trustee may deem
sufficient.
SECTION 6.06. [Reserved].
SECTION 6.07. Exhibits.
The Exhibits hereto shall be deemed a part of this Second Supplement to
the Supplemental Indenture.
15
<PAGE>
SECTION 6.08. Duplicate Originals.
The parties may sign any number of copies of this Second Supplement to
the Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
(seal) TEXACO CAPITAL INC.
By: Peter M. Wissel
-------------------------
Title:
Attest:
Eric B. Silberstein
- ---------------------
Title: Attorney
(seal) TEXACO INC.
By: S. Faber
-------------------------
Title:
Attest:
Eric B. Silberstein
- ---------------------
Title: Attorney
(seal) THE CHASE MANHATTAN BANK,
as Trustee
By: R.J. Hollerin
-------------------------
Title: Second Vice President
Attest:
John T. Needham, Jr.
- ---------------------
Title: Trust Officer
<PAGE>
EXHIBIT A-1
[FORM OF TEMPORARY GLOBAL NOTE]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE.
TEXACO CAPITAL INC.
Temporary Global Note
representing
U.S.$200,000,000 3.50% Guaranteed Cash-Settled Convertible Notes Due 2004
Guaranteed by
TEXACO INC.
Interest Payable: August 5
Texaco Capital Inc. promises to pay to bearer, upon surrender hereof,
the principal sum specified in Schedule A hereto on August 5, 2004 (except to
the extent previously redeemed).
1. Interest.
Texaco Capital Inc. (the "Company"), a Delaware corporation, promises
to pay interest on the principal amount of this Note from time to time specified
in Schedule A hereto at the rate per annum shown above. The Company will pay
interest annually on August 5 of each year. Interest on the Note will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from August 5, 1997. Except as provided in the Indenture, this Note
will
<PAGE>
cease to bear interest from and after the earlier of (a) August 5, 2004 or
(b) the date fixed for redemption of this Note. If interest is required to be
calculated for a period of less than one year, it will be calculated on the
basis of a 360-day year consisting of 12 months of 30 days each.
2. Method of Payment.
Upon any payment of interest on this Note, the Principal Paying Agent
(as defined below) shall cause Schedule A of this Note to be endorsed to reflect
such payment. No payment on this Note will be made at any office or agency of
the Company in the United States (as defined below) or by check mailed to an
address in the United States or by wire transfer to an account maintained by the
Holder of this Note with a bank in the United States except as may be permitted
under United States federal tax laws and regulations then in effect without
adverse tax consequences to the Company. Notwithstanding the foregoing, in the
event that payment in U.S. dollars of the full amount payable on this Note at
the offices of all Non-U.S. Paying Agents (as defined below) would be illegal or
effectively precluded as a result of exchange controls or similar restrictions,
payment on this Note will be made by a Paying Agent in the Borough of Manhattan,
The City of New York, if and only if (i) such Paying Agent, under applicable law
and regulations, would be able to make such payment and (ii) such payment would
not involve, in the opinion of the Company, adverse tax consequences for the
Company. Notwithstanding any other provision of this Note, no payment of
principal or interest shall be made on any portion of this Note unless there
shall have been delivered to the Principal Paying Agent a certificate
substantially in the form of Exhibit 2 hereto with respect to the portion of
this Note with respect to which such principal or interest is to be paid. Such
certificate shall have been delivered to the Principal Paying Agent by Morgan
Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear System (the "Euroclear Operator"), or Cedel Bank, societe anonyme
("Cedel Bank") and shall be based on a certificate substantially in the form of
Exhibit 1 hereto provided to the Euroclear Operator or Cedel Bank, as the case
may be, by those of its account holders who are to receive such payment of
principal or interest. Owners of beneficial interests in this Note must look
solely to the Euroclear Operator or Cedel Bank, as the case may be, for their
share of each payment made to the bearer of this Note.
3. Paying Agents.
Initially, The Chase Manhattan Bank, as Trustee (the "Trustee"), at its
office in London at Trinity Tower, 9 Thomas More Street, London E19YT, England,
will act as the principal Paying Agent for the Notes outside the United States
(the "Principal Paying Agent"). Initially, Chase Manhattan Bank
A-1-2
<PAGE>
Luxembourg S.A., at its office in Luxembourg at 5 rue Plaetis, L-2338
Luxembourg, Luxembourg, will act as a Paying Agent in Luxembourg. The Company
may appoint additional Paying Agents or change any Paying Agent without notice
to Holders (any such additional Paying Agent or other Paying Agent for the Notes
outside the United States, a "Non-U.S. Paying Agent").
4. Indenture.
The Company issued this Note as part of a Series of Securities,
designated as "3.50% Guaranteed Cash-Settled Convertible Notes Due 2004" (the
"Notes"), under an indenture dated as of August 24, 1984, as supplemented and
restated by the First Supplemental Indenture dated as of January 31, 1990, as
further amended by the First Supplement to the First Supplemental Indenture
dated as of October 11, 1990, and as further amended by the Second Supplement to
the First Supplemental Indenture dated as of August 5, 1997 (as so supplemented
and amended, the "Indenture"), among the Company, Texaco Inc. and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 7aaa-77bbbb) as amended (the "Act"). This Note is subject to all such
terms, and the Holder of this Note is referred to the Indenture and the Act for
a statement of them. All terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
5. Guaranty.
The Notes are guaranteed by Texaco Inc.
6. Exchange for Permanent Global Note.
This Note is exchangeable in whole or from time to time in part on or
after the Exchange Date (as defined below) for an interest (equal to the
principal amount of the portion of this Note being exchanged) in a single
permanent global note (the "Permanent Global Note") upon the request of the
Euroclear Operator or Cedel acting on behalf of the owner of a beneficial
interest in this Note, to the Principal Paying Agent upon delivery to the
Principal Paying Agent of a certificate substantially in the form of Exhibit 2
hereto with respect to the portion of this Note to be exchanged; provided that
the Company shall not be required to exchange this Note for a period of fifteen
calendar days preceding the first publication of a notice of redemption of the
Notes. Such certificate shall have been delivered to the Principal Paying Agent
by the Euroclear Operator or Cedel, as the case may be, and shall be based on a
certificate substantially in the form of
A-1-3
<PAGE>
Exhibit 1 hereto provided to the Euroclear Operator or Cedel, as the case may
be, by those of its account holders having an interest in the portion hereof to
be exchanged. Notwithstanding the foregoing, if this Note is subject to a tax
redemption as described on the reverse of the Permanent Global Note, the form of
which is attached hereto, interests in this Note may be exchanged for interests
in the Permanent Global Note on and after such redemption date as if such
redemption date had been the Exchange Date, subject to receipt of the
certificates described in the preceding sentence. Upon exchange of any portion
of this Note for an interest in the Permanent Global Note, the Principal Paying
Agent shall cause Schedule A of this Note to be endorsed to reflect the
reduction of its principal amount by an amount equal to the aggregate principal
amount being so exchanged. Except as otherwise provided herein, until exchanged
for the Permanent Global Note, this Note is governed by the terms and conditions
of the Permanent Global Note to be issued in exchange for this Note, which terms
and conditions are hereby incorporated by reference herein MUTATIS MUTANDIS and
shall be binding on the Company and the Holder hereof as if fully set forth
herein, and shall in all respects be entitled to the same benefits under the
Indenture as the Permanent Global Note duly authenticated and delivered.
Notwithstanding the foregoing, the provisions of paragraph 6 of the Permanent
Global Note shall not apply to this Note. The form of the Permanent Global Note
is attached hereto.
As used herein:
(a) the term "Exchange Date" means September 15, 1997,
PROVIDED that if an interest represented by this Note is held by Credit
Suisse First Boston (Europe) Limited, Swiss Bank Corporation, UBS
Limited or any other manager participating in the distribution of the
Notes as part of an unsold allotment or subscription, the Exchange Date
with respect to such interest shall be the day after the date such
interest is sold by such manager, all as determined and notified to the
Principal Paying Agent by Credit Suisse First Boston (Europe) Limited;
and
(b) the term "United States" means the United States of
America (including the States and the District of Columbia); and its
"possessions" include Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and the Northern Mariana Islands.
A-1-4
<PAGE>
7. Authentication.
This Note shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
A-1-5
<PAGE>
Dated: August 5, 1997 TEXACO CAPITAL INC.
By: ______________________
[Title]
By: ______________________
[Title]
Authenticated:
THE CHASE MANHATTAN BANK
as Trustee
By: ______________________
Authorized Officer
GUARANTY
TEXACO INC., a Delaware corporation (the "Guarantor"), unconditionally
guarantees to the Holder of this Note the due and punctual payment of the
principal of and interest on this Note.
The Guarantor shall not be entitled to receive any payments based upon
a right of subrogation with respect to any amounts paid by the Guarantor to
Holders until the principal of and interest on all Notes shall have been paid in
full or for which payment has been provided.
TEXACO INC.
By: ______________________
[Title]
<PAGE>
SCHEDULE A
SCHEDULE OF PAYMENTS AND EXCHANGES
The initial Principal Amount of this Note is U.S.$200,000,000. The
following payments of interest and exchanges of a part of this Note for an
interest in the Permanent Global Note have been made:
<TABLE>
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Date of Payment of Interest Principal Amount Remaining Principal Notation Made
Exchange Exchanged for Amount Outstanding by or on Behalf of
or Interest Permanent Following Principal Paying Agent
Payment Global Bearer Note Such Exchange
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<PAGE>
EXHIBIT 1
[FORM OF CERTIFICATE TO BE GIVEN BY
AN ACCOUNT HOLDER OF THE EUROCLEAR OPERATOR
AND CEDEL BANK]
CERTIFICATE
-----------------------------------------
Texaco Capital Inc.
3.50% Guaranteed Cash-Settled Convertible Notes Due 2004
Represented by the Temporary Global Note
This is to certify that as of the date hereof, and except as set forth
below, the above-captioned Notes held by you for our account (i) are owned by
person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that are
(a) foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or (b) United States person(s)
who acquired the Notes through foreign branches of United States financial
institutions and who hold the Notes through such United States financial
institutions on the date hereof (and in either case (a) or (b), each such United
States financial institution hereby agrees, on its own behalf or through its
agent, that you may advise the Company or the Company's agent that it will
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the U.S.
Internal Revenue Code of 1986, as amended, and the regulations thereunder), or
(iii) are owned by United States or foreign financial institution(s) for
purposes of resale during the restricted period (as defined in U.S. Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the
Notes is a United States or foreign financial institution described in clause
(iii) above (whether or not also described in clause (i) or (ii)) such financial
institution has not acquired the Notes for purposes of resale directly or
indirectly to a United States person or to a person within the United States or
its possessions.
<PAGE>
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Notes held
by you for our account in accordance with your Operating Procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.
This certificate excepts and does not relate to U.S.$ _________ of such
interest in the above Notes in respect of which we are not able to certify and
as to which we understand exchange for and delivery of definitive Notes (or, if
relevant, exercise of any rights or collection of any principal or interest)
cannot be made until we do so certify.
We understand that this certification is required in connection with
certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are
commenced or threatened in connection with which this certification is or would
be relevant, we irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Dated: ___________, ____
[To be dated no earlier than the 10th day
before September 15, 1997]
[NAME OF ACCOUNT HOLDER]
By: _________________________
(Authorized Signatory)
Name:
Title:
2
<PAGE>
EXHIBIT 2
[FORM OF CERTIFICATE TO BE GIVEN BY
THE EUROCLEAR OPERATOR AND CEDEL BANK]
CERTIFICATE
-----------------------------------------
Texaco Capital Inc.
3.50% Guaranteed Cash-Settled Convertible Notes Due 2004
Represented by the Temporary Global Note
This is to certify that, based solely on certifications we have
received in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
to the effect set forth in the Temporary Global Note, as of the date hereof,
U.S.$__________ principal amount of the above-captioned Notes (i) is owned by
persons that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States persons"), (ii) is owned by United States persons that are (a)
foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or (b) United States persons who
acquired the Notes through foreign branches of United States financial
institutions and who hold the Notes through such United States financial
institutions on the date hereof (and in either case (a) or (b), each such United
States financial institution has agreed, on its own behalf or through its agent,
that we may advise the Company or the Company's agent that it will comply with
the requirements of Section 165(j)(3)(A), (B) or (C) of the U.S. Internal
Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is
owned by United States or foreign financial institutions for purposes of resale
during the restricted period (as defined in U.S. Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7)), and in addition if the owners of the Notes are United
States or foreign financial institutions described in clause (iii) above
(whether or not also described in clause (i) or (ii)), such financial
institutions have certified that they have not acquired the Notes for purposes
of resale directly or
<PAGE>
indirectly to a United States person or to a person within the United States or
its possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia); and its "possessions"
include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island
and the Northern Mariana Islands.
We further certify (i) that we are not making available herewith for
exchange (or, if relevant, seeking to collect principal or interest with respect
to) any portion of the temporary global Security representing the
above-captioned Notes excepted in the above-referenced certificates of Member
Organizations and (ii) that as of the date hereof we have not received any
notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of the
part submitted herewith (or, if relevant, with respect to which principal or
interest is being requested) are no longer true and cannot be relied upon as of
the date hereof.
We understand that this certification is required in connection with
certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are
commenced or threatened in connection with which this certification is or would
be relevant, we irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Dated: ___________, ____
[To be dated no earlier than
September 15, 1997]
[MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
BRUSSELS OFFICE, as Operator of the
Euroclear System]
[CEDEL BANK S.A.]
By: ___________________________
Name:
Title:
2
<PAGE>
EXHIBIT A-2
[FORM OF FACE OF PERMANENT GLOBAL NOTE]
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE.
TEXACO CAPITAL INC.
Permanent Global Note
representing up to
U.S.$200,000,000 3.50% Guaranteed Cash-Settled Convertible Notes Due 2004
Guaranteed by
TEXACO INC.
Interest Payable: August 5
Texaco Capital Inc. promises to pay to bearer, upon surrender hereof,
the principal sum specified in Schedule A hereto on August 5, 2004 (except to
the extent previously redeemed or converted).
<PAGE>
Dated: August 5, 1997 TEXACO CAPITAL INC.
By: ______________________
[Title]
By: ______________________
[Title]
Authenticated:
THE CHASE MANHATTAN BANK
as Trustee
By: ______________________
Authorized Officer
<PAGE>
[FORM OF REVERSE OF PERMANENT GLOBAL NOTE]
1. Interest.
Texaco Capital Inc. (the "Company"), a Delaware corporation, promises
to pay interest on the principal amount of this Note from time to time specified
in Schedule A hereto at the rate per annum shown above. The Company will pay
interest annually on August 5 of each year (each, an "Interest Payment Date").
Interest on the Note will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from August 5, 1997 (the "Issue
Date"). Except as provided in the Indenture, this Note will cease to bear
interest from and after the earlier of (a) August 5, 2004 or (b) the date fixed
for redemption of this Note, and any portion of this Note with respect to which
a Conversion Notice (as defined below) has been delivered will cease to bear
interest from and after the Interest Payment Date immediately preceding the
relevant Conversion Date (as defined below) or, if there is no such Interest
Payment Date, the Issue Date. If interest is required to be calculated for a
period of less than one year, it will be calculated on the basis of a 360-day
year consisting of 12 months of 30 days each.
2. Method of Payment.
Payment of the principal of this Note and the interest due at maturity
(or on any redemption date) will be made upon presentation and surrender of this
Note at the office or of any Non-U.S. Paying Agent. No payment on this Note will
be made at any office or agency of the Company in the United States (as defined
below) or by check mailed to an address in the United States or by wire transfer
to an account maintained by the Holder of this Note with a bank in the United
States except as may be permitted under United States federal tax laws and
regulations then in effect without adverse tax consequences to the Company.
Notwithstanding the foregoing, in the event that payment in U.S. dollars of the
full amount payable on this Note at the offices of all Non-U.S. Paying Agents
(as defined below) would be illegal or effectively precluded as a result of
exchange controls or similar restrictions, payment on this Note will be made by
a Paying Agent in the Borough of Manhattan, The City of New York, if and only if
(i) such Paying Agent, under applicable law and regulations, would be able to
make such payment and (ii) such payment would not involve, in the opinion of the
Company, adverse tax consequences for the Company. Owners of beneficial
interests in this Note must look solely to Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear System (the "Euroclear
Operator") or
A-2-3
<PAGE>
Cedel Bank, societe anonyme ("Cedel Bank"), as the case may be, for their share
of each payment made to the bearer of this Note.
3. Paying and Conversion Agents.
Initially, The Chase Manhattan Bank, as Trustee (the "Trustee"), at its
office in London at Trinity Tower, 9 Thomas More Street, London E19YT, England,
will act as the principal Paying Agent for the Notes outside the United States
(the "Principal Paying Agent") and as the principal Conversion Agent for the
Notes outside the United States (the "Principal Conversion Agent"). Initially,
Chase Manhattan Bank Luxembourg S.A., at its office in Luxembourg at 5 rue
Plaetis, L-2338 Luxembourg, Luxembourg, will act as a Paying Agent and a
Conversion Agent in Luxembourg. The Company may appoint additional Paying Agents
or Conversion Agents or change any Paying Agent or Conversion Agent without
notice to Holders (any such additional Paying Agent or other Paying Agent for
the Notes outside the United States, a "Non-U.S. Paying Agent").
4. Indenture.
The Company issued this Note as part of a Series of Securities,
designated as "3.50% Guaranteed Cash-Settled Convertible Notes Due 2004" (the
"Notes"), under an indenture dated as of August 24, 1984, as supplemented and
restated by the First Supplemental Indenture dated as of January 31, 1990, as
further amended by the First Supplement to the First Supplemental Indenture
dated as of October 11, 1990, and as further amended by the Second Supplement to
the First Supplemental Indenture dated as of August 5, 1997 (as so supplemented
and amended, the "Indenture"), among the Company, Texaco Inc. and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 7aaa-77bbbb) as amended (the "Act"). This Note is subject to all such
terms, and the Holder of this Note is referred to the Indenture and the Act for
a statement of them. All terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
A-2-4
<PAGE>
5. Guaranty.
The Notes are guaranteed by Texaco Inc.
6. Conversion.
At any time during the Conversion Period (as defined below), this Note
may be surrendered for conversion into the cash Conversion Amount (as defined
below) at the option of the owners of beneficial interests herein as follows. On
any Business Day (as defined below) during the Conversion Period, the owner of a
beneficial interest in this Note may give notice to any Conversion Agent, who
will provide copies to the Company, the Calculation Agent, the Principal
Conversion Agent and the Trustee, in writing in the form provided in the
Indenture (a "Conversion Notice"), that such owner elects to convert this Note
or a specified portion hereof into the Conversion Amount. In addition, the
converting owner of a beneficial interest in this Note must deliver the
Conversion Notice to the Euroclear Operator or Cedel Bank, as the case may be,
together with an authority to debit such owner's account pro tanto. Interests in
this Note may only be converted in a minimum principal amount of U.S.$10,000 and
integral multiples of U.S.$10,000 in excess thereof. On the relevant Conversion
Date (as defined below), the Conversion Agent to whom the Conversion Notice is
delivered shall obtain confirmation from the Euroclear Operator or Cedel Bank,
as the case may be, that such owner is shown on its records as the owner of at
least the principal amount of Notes in respect of which the Conversion Notice is
delivered, and the Euroclear Operator or Cedel Bank, as the case may be, shall
debit such owner's account with the principal amount of this Note to be
converted and the principal amount of this Note shall be reduced accordingly.
Any question as to the validity of a Conversion Notice or as to whether such
notice has been properly and timely given will be resolved finally by the
Principal Conversion Agent in its sole discretion. No interest shall be payable
on any portion of this Note with respect to which a Conversion Notice has been
delivered on any Interest Payment Date occurring on or after the relevant
Conversion Date.
On the Settlement Date (as defined below) with respect to the
conversion of a beneficial interest in this Note, the Holder of this Note will
be entitled to receive the Conversion Amount in cash. Any payment of the
Conversion Amount shall be deemed to be a payment of principal for all purposes
under the Indenture and the Notes. Owners of beneficial interests in this Note
must look solely to the Euroclear Operator or Cedel Bank, as the case may be,
for their share of each payment made to the bearer of this Note.
A-2-5
<PAGE>
As used herein:
(a) the term "Business Day" means any day that is not a
Saturday, a Sunday or a day on which banking institutions or trust
companies in The City of New York, the City of London or Luxembourg are
authorized or obligated by law or executive order to close;
(b) the term "Closing Price" means, with respect to any
security on any date, the closing sale price or last reported sale
price for the security on the principal securities exchange or national
market system on which such security is listed for trading or quoted on
such date or, if such security is not so listed or quoted on such date,
the fair market value of such security on such date, as determined by
the Calculation Agent, in each case subject to adjustment as described
below;
(c) the term "Conversion Amount" means, with respect to the
principal amount of this Note with respect to which a Conversion Notice
has been given, (i) if the relevant Conversion Notice is delivered
prior to notice of redemption having been given by the Company, an
amount in cash determined by the Calculation Agent to be the Closing
Price of the Texaco Common Stock on the related Conversion Date (or, if
the Conversion Date is not a Trading Day, on the first following day
that is a Trading Day) multiplied by the Conversion Ratio, or (ii) if
the relevant Conversion Notice is delivered after the giving of a
notice of redemption by the Company or within eight Business Days prior
to July 22, 2004, an amount in cash determined by the Calculation Agent
to be the average of the Closing Prices of the Texaco Common Stock on
the five consecutive Trading Days commencing on the applicable
Conversion Date multiplied by the Conversion Ratio;
(d) the term "Conversion Date" means, with respect to any
portion of this Note with respect to which a Conversion Notice is
given, the second Business Day immediately following the date of
delivery of such Conversion Notice to the relevant Conversion Agent and
the Euroclear Operator or Cedel Bank, as the case may be;
(e) the term "Conversion Period" means the period commencing
on September 15, 1997 and ending at 5:00 P.M., London time, on July 22,
2004 or, if this Note shall have been called for redemption prior to
August 5, 2004, ending at 5:00 P.M., London time, on the date eight
Business Days prior to the date fixed for redemption thereof; provided
that if the Company defaults in making payment in full in respect of
this Note or
A-2-6
<PAGE>
prior to the date fixed for redemption hereof, the Conversion Period
will continue until 5:00 P.M., London time, on the date upon which the
full amount of the moneys payable in respect of this Note has been
duly received by the Trustee and notice of such receipt has been duly
given to the Holders of the Notes by the Trustee;
(f) the term "Conversion Ratio" means 71.35 shares of Texaco
Common Stock per U.S.$10,000 principal amount of Notes;
(g) the term "Settlement Date" means the day as soon as
reasonably practicable after the Conversion Date determined by the
Calculation Agent and the Principal Conversion Agent to be the day for
payment of the Conversion Amount;
(h) the term "Texaco Common Stock" means the common stock of
Texaco Inc.; and
(i) "Trading Day" means, with respect to any security, any
day that is a trading day on the principal securities exchange or
national market system on which such security is then listed other than
a day on which (i) trading on such exchange or national market system
is scheduled to close prior to its regular weekday closing time or (ii)
there occurs any suspension of or limitation imposed on trading of such
security on such exchange during the one-half hour period that ends at
its regular weekday closing time that is, in the determination of the
Calculation Agent, material.
The Closing Price of the Texaco Common Stock on any of the Trading Days
used to calculate the Conversion Amount will be subject to adjustment by the
Calculation Agent as described below to the extent that any of the events
requiring such adjustment occurs during the period commencing on the date of
this Note and ending on such Trading Day.
Texaco Common Stock Dividends and Extraordinary Dividends and Distributions
In the event that a dividend or other distribution is declared (i) on
any class of Texaco capital stock, payable in shares of Texaco Common Stock,
(ii) on the Texaco Common Stock payable in cash in an amount greater than 10% of
the Closing Price of the Texaco Common Stock on the date fixed for the
determination of the shareholders of Texaco entitled to receive such cash
dividend (an "Extraordinary Cash Dividend"), or (iii) on the Texaco Common Stock
of
A-2-7
<PAGE>
evidences of indebtedness or assets (including securities, but excluding any
dividend or distribution covered by clause (i) or any Texaco Spin-off described
under "-Dissolution of Texaco; Mergers, Consolidations or Sales of Assets;
Spin-offs" below) (an "Extraordinary Distribution"), any Closing Price of the
Texaco Common Stock used to calculate the Conversion Amount on any Trading Day
that follows the date (the "Texaco Record Date") fixed for the determination of
the shareholders of Texaco entitled to receive such dividend or other
distribution shall be increased by multiplying such Closing Price by a fraction,
the numerator of which shall be the number of shares of Texaco Common Stock
outstanding on the Texaco Record Date plus the number of shares constituting
such distribution or, in the case of any Extraordinary Cash Dividend or
Extraordinary Distribution, plus the number of shares of Texaco Common Stock
that could be purchased with the amount of such Extraordinary Cash Dividend or
the fair market value (as determined by the Calculation Agent, whose
determination shall be conclusive and binding) of the evidences of indebtedness
or assets constituting such Extraordinary Distribution at the Closing Price on
the Trading Day immediately subsequent to such Texaco Record Date, and the
denominator of which shall be the number of shares of Texaco Common Stock
outstanding on the Texaco Record Date.
Subdivisions and Combinations of the Texaco Common Stock
In the event that the outstanding shares of Texaco Common Stock are
subdivided into a greater number of shares, the Closing Price of the Texaco
Common Stock used to calculate the Conversion Amount on any Trading Day that
follows the date on which such subdivision becomes effective will be
proportionately increased and, conversely, in the event that the outstanding
shares of Texaco Common Stock are combined into a smaller number of shares, such
Closing Price of the Texaco Common Stock will be proportionately reduced.
Reclassifications of the Texaco Common Stock
In the event that the Texaco Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (except to the extent otherwise
provided under "-Texaco Common Stock Dividends and Extraordinary Dividends and
Distributions" and "-Subdivisions and Combinations of Texaco Common Stock" above
or pursuant to a Reorganization Event described under "-Dissolution of Texaco;
Mergers, Consolidations or Sales of Assets; Spin-offs" below), the Conversion
Amount will be calculated by using the aggregate Closing Prices of the shares of
stock into which a share of Texaco Common Stock was changed on any Trading Day
that follows the effectiveness of such change.
A-2-8
<PAGE>
As a result of the foregoing provisions, in the case of a
reorganization or reclassification of the Texaco Common Stock, the Closing
Prices of one or more securities in addition to or in substitution for the
Texaco Common Stock may be used to calculate the Conversion Amount. For example,
if the Texaco Common Stock were reclassified into one share of Texaco Class A
Common Stock and one share of Texaco Class B Common Stock, the Conversion Amount
would be calculated by reference to the Closing Prices of the Texaco Class A
Common Stock and the Texaco Class B Common Stock.
Other Dilution Events
In the event that the Company (with the prior written approval of the
Calculation Agent) or the Calculation Agent determines that an adjustment should
be made to the Closing Price of the Texaco Common Stock on any of the Trading
Days used to calculate the Conversion Amount as a result of one or more events
or circumstances not otherwise described above (even if such event or
circumstance is specifically excluded from the operation of the provisions
described above), the Company shall at its own expense and acting reasonably
request the Calculation Agent to determine as soon as practicable what
adjustment (if any) is fair and reasonable to take account thereof.
Dissolution of Texaco; Mergers, Consolidations or Sales of Assets; Spin-offs.
In the event of any (i) consolidation or merger of Texaco with or into
another entity (other than a consolidation or merger that does not result in a
reclassification, conversion, exchange or cancellation of outstanding Texaco
Common Stock), (ii) sale, transfer, lease or conveyance of all or substantially
all of the assets of Texaco, (iii) liquidation, dissolution or winding up of
Texaco or (iv) declaration of a distribution on the Texaco Common Stock of the
common stock of any subsidiary of Texaco (a "Texaco Spin-off") (any of the
events described in (i), (ii), (iii) or (iv), a "Reorganization Event"), for
purposes of determining the Conversion Amount, the Closing Price of the Texaco
Common Stock on any Trading Day subsequent to, in the case of a Reorganization
Event other than a Texaco Spin-off, the effective time of such Reorganization
Event or, in the case of a Texaco Spin-off, the record date fixed for the
determination of the shareholders of Texaco entitled to receive the securities
distributed in such Texaco Spin-off (the "Spin-off Record Date") will be deemed
to be the amount equal to (1) the value of the cash and other property
(including securities) received by a holder of a share of Texaco Common Stock
(assuming such holder of Texaco Common Stock failed to exercise any rights of
election and received per share the kind and amount received by a plurality of
non-electing shares) in any such Reorganization Event (plus, in the case of a
Texaco Spin-off, the value of a share
A-2-9
<PAGE>
of Texaco Common Stock), and (2) to the extent that such holder obtains
securities in any Reorganization Event, the value of the cash and other property
received by the holder of such securities in any subsequent event with respect
to the issuer of such securities that would, if such issuer were Texaco, be a
Reorganization Event. For purposes of determining any such Closing Prices, the
value of (i) any cash and other property (other than securities) received in any
such Reorganization Event will be an amount equal to the value of such cash and
other property at the effective time of such Reorganization Event (as determined
by the Calculation Agent, whose determination shall be conclusive and binding),
and (ii) any property consisting of securities received in any such
Reorganization Event will be an amount equal to the Closing Prices of such
securities on any Trading Day following, in the case of a Reorganization Event
other than a Texaco Spin-off, the effective time of such Reorganization Event
or, in the case of a Texaco Spin-off, the Spin-off Record Date.
If any action would require adjustment of the Closing Price pursuant to
more than one of the foregoing provisions, only one adjustment shall be made and
such adjustment shall be the amount of adjustment that has the highest absolute
value to the Holder of this Note. No adjustment in the Closing Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% of the Closing Price, but any adjustment that would otherwise be
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
The Calculation Agent will promptly notify the Company and the
Principal Conversion Agent, which will in turn notify the Holders, of any event
requiring an adjustment and of the method of calculation to be used to make any
dilution adjustment as described above.
All determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error, shall
be conclusive for all purposes and binding on the Company and the Holders, and
the Calculation Agent shall have no liability therefor. All results of any
calculation of the Conversion Amount will be rounded, if necessary, to the
nearest one-one-hundred-thousandth of a percent (with five one-millionths of a
percentage point being rounded downward).
A-2-10
<PAGE>
7. Redemption.
The Notes are redeemable, at the option of the Company, in whole but
not in part, at any time on or after August 5, 1999, at the principal amount
thereof upon not less than 15 days' nor more than 30 days' notice to Holders.
8. Tax Redemption.
The Notes may be redeemed as a whole, at the option of the Company at
any time prior to maturity, upon the giving of a notice of redemption in the
manner provided in the Indenture, at the principal amount thereof, together with
accrued interest to the date fixed for redemption, if the Company determines
that, as a result of any change in or amendment to the laws (or any regulations
or rulings promulgated thereunder) of the United States or of any political
subdivision or taxing authority thereof or therein affecting taxation, or any
change in official position regarding the application or interpretation of such
laws, regulations or rulings, which change or amendment becomes effective on or
after the date of this Note, the Company or Texaco Inc., as the case may be, has
or will become obligated to pay Additional Amounts (as defined below) with
respect to the Notes as described below under paragraph 9 hereof. Prior to the
giving of any notice of redemption pursuant to this paragraph, the Company shall
deliver to the Trustee (i) a certificate stating that the Company is entitled to
effect such redemption and setting forth a statement of facts showing that the
conditions precedent to the right of the Company to so redeem have occurred (the
date on which such certificate is delivered to the Trustee being the "Redemption
Determination Date"), and (ii) an opinion of counsel reasonably acceptable to
the Trustee to such effect based on such statement of facts; provided that no
such notice of redemption shall be given earlier than 60 days prior to the
earliest date on which the Company or Texaco Inc., as the case may be, would be
obligated to pay such Additional Amounts if a payment in respect of any Note
were then due.
If the Company shall determine that any payment made outside the United
States by the Company or Texaco Inc., as the case may be, by any Paying Agent of
principal or interest due in respect of any Note or Coupon (as defined below)
would, under any present or future laws or regulations of the United States, be
subject to any certification, identification or other information reporting
requirement of any kind, the effect of which is the disclosure to the Company,
Texaco Inc., any Paying Agent or any governmental authority of the nationality,
residence or identity of a beneficial owner of such Note or Coupon who is a
United States Alien (as defined below under ", Payment of Additional Amounts")
(other than such a requirement (a) that would not be applicable to a payment
made by the Company or Texaco Inc., as the case may be, or any Paying
A-2-11
<PAGE>
Agent (i) directly to the beneficial owner or (ii) to a custodian, nominee or
other agent of the beneficial owner, or (b) that can be satisfied by such
custodian, nominee or other agent certifying to the effect that such beneficial
owner is a United States Alien; provided that in each case referred to in
clauses (a)(ii) and (b) payment by such custodian, nominee or agent to such
beneficial owner would not otherwise be subject to any such requirement), the
Company shall redeem the Notes, as a whole, at the principal amount thereof,
together with accrued interest to the date fixed for redemption or, at the
election of the Company or Texaco Inc., as the case may be, if the conditions of
the next paragraph are satisfied, pay the additional amounts specified in such
paragraph. The Company shall make such determination and election as soon as
practicable and publish prompt notice thereof (the "Determination Notice")
stating the effective date of such certification, identification or other
information reporting requirements, whether the Company will redeem the Notes or
has elected to pay the additional amounts specified in the next paragraph, and
(if applicable) the last date by which the redemption of the Notes must take
place, as provided in the next sentence. If the Company redeems the Notes, such
redemption shall take place on such date, not later than one year after the
publication of the Determination Notice, as the Company shall elect by notice to
the Trustee. Notwithstanding the foregoing, the Company shall not so redeem the
Notes if the Company or Texaco Inc., as the case may be, shall subsequently
determine, not less than 30 days prior to the date fixed for redemption, that
subsequent payments would not be subject to any such certification,
identification or other information reporting requirement, in which case the
Company shall publish prompt notice of such determination and any earlier
redemption notice shall be revoked and of no further effect.
If and so long as the certification, identification or other
information reporting requirements referred to in the preceding paragraph would
be fully satisfied by payment of a backup withholding tax or similar charge, the
Company or Texaco Inc., as the case may be, may elect to pay as additional
amounts such amounts as may be necessary so that every net payment made outside
the United States following the effective date of such requirements by the
Company or Texaco Inc., as the case may be, or any Paying Agent of principal or
interest due in respect of any Note or any Coupon of which the beneficial owner
is a United States Alien (but without any requirement that the nationality,
residence or identity of such beneficial owner be disclosed to the Company,
Texaco Inc., any Paying Agent or any governmental authority, with respect to the
payment of such additional amounts), after deduction or withholding for or on
account of such backup withholding tax or similar charge (other than a backup
withholding tax or similar charge that (i) would not be applicable in the
circumstances referred to in the second parenthetical clause of the first
sentence of the preceding paragraph, or (ii) is imposed as a result of
presentation of such Note or Coupon for payment
A-2-12
<PAGE>
more than 15 days after the date on which such payment becomes due and payable
or on which payment thereof is duly provided for, whichever occurs later), will
not be less than the amount provided for in such Note or Coupon to be then due
and payable. In the event the Company or Texaco Inc., as the case may be, elects
to pay any additional amounts pursuant to the applicable provisions of this
paragraph, the Company shall have the right to redeem the Notes as a whole at
any time pursuant to the provisions of the preceding paragraph and the
redemption price of such Notes will not be reduced for applicable withholding
taxes. If the Company or Texaco Inc., as the case may be, elects to pay
additional amounts pursuant to this paragraph and the condition specified in the
first sentence of this paragraph should no longer be satisfied, then the Company
will redeem the Notes as a whole, pursuant to the applicable provisions of the
preceding paragraph.
9. Payment of Additional Amounts.
The Company will, subject to certain exceptions and limitations set
forth below, pay such additional amounts (the "Additional Amounts") to the
Holder of this Note who is a United States Alien as may be necessary in order
that every net payment of the principal of and interest on this Note and any
other amounts payable on such Note, after withholding for or on account of any
present or future tax, assessment or governmental charge imposed upon or as a
result of such payment by the United States (or any political subdivision or
taxing authority thereof or therein), will not be less than the amount provided
for in this Note to be then due and payable. The Company will not, however, be
required to make any payment of Additional Amounts to any such Holder for or on
account of:
(a) any such tax, assessment or other governmental charge that
would not have been so imposed but for (i) the existence of any
present or former connection between such Holder (or between a
fiduciary, settlor, beneficiary, member or shareholder of such Holder,
if such Holder is an estate, a trust, a partnership or a corporation)
and the United States and its possessions, including, without
limitation, such Holder (or such fiduciary, settlor, beneficiary,
member or shareholder) being or having been a citizen or resident
thereof or being or having been engaged in a trade or business or
present therein or having or having had a permanent establishment
therein or (ii) the presentation by the Holder of this Note for
payment on a date more than 15 days after the date on which such
payment became due and payable or the date on which payment thereof is
duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer or personal
property tax or any similar tax, assessment or governmental charge;
A-2-13
<PAGE>
(c) any tax, assessment or other governmental charge imposed by
reason of such Holder's past or present status as a personal holding
company or foreign personal holding company or controlled foreign
corporation or passive foreign investment company with respect to the
United States or as a corporation that accumulates earnings to avoid
United States federal income tax or as a private foundation or other
tax-exempt organization;
(d) any tax, assessment or other governmental charge that is
payable otherwise than by withholding from payments on or in respect
of this Note;
(e) any tax, assessment or other governmental charge required to
be withheld by any Paying Agent from any payment of principal of or
interest on this Note, if such payment can be made without such
withholding by any other Paying Agent in a city in Western Europe;
(f) any tax, assessment or other governmental charge that would
not have been imposed but for the failure to comply with
certification, information or other reporting requirements concerning
the nationality, residence or identity of the owner or beneficial
owner of this Note, if such compliance is required by statute or by
regulation of the United States or of any political subdivision or
taxing authority thereof or therein as a precondition to relief or
exemption from such tax, assessment or other governmental charge;
(g) any tax, assessment or other governmental charge imposed by
reason of such Holder's past or present status as the actual or
constructive owner of 10% or more of the total combined voting power
of all classes of stock entitled to vote of the Company or as a direct
or indirect subsidiary of the Company; or
(h) any combination of items (a), (b), (c), (d), (e), (f) or (g);
nor shall Additional Amounts be paid with respect to any payment on this Note to
a United States Alien who is a fiduciary or partnership or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of the United States (or any political subdivision thereof) to be
included in the income, for tax purposes, of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership or a beneficial owner
who would not have been entitled to the Additional Amounts had such beneficiary,
settlor, member or beneficial owner been the Holder of this Note.
A-2-14
<PAGE>
As used herein, the term "United States Alien" means any person who,
for United States federal income tax purposes, is a foreign corporation, a
nonresident alien individual, a nonresident alien fiduciary of a foreign estate
or trust, or a foreign partnership one or more of the members of which is a
foreign corporation, a nonresident alien individual or a nonresident alien
fiduciary of a foreign estate or trust.
10. Transfer.
The Holder of this Note may transfer this Note in accordance with the
Indenture; provided that this Note may be transferred only to a common
depositary outside the United States for the Euroclear Operator and Cedel Bank
or to a nominee of such a depositary. The Company may require the Holder of this
Note, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture.
11. Persons Deemed Owners.
The bearer of this Note may be treated as the owner of it for all
purposes.
12. Amendments and Waivers.
Subject to certain exceptions, the Notes or the Indenture with respect
to the Notes may be amended with the consent of the Holders of at least 50.1% in
principal amount of the Notes outstanding, and any past default or compliance
with any provision may be waived with the consent of the Holders of at least
50.1% in principal amount of the Notes outstanding. Without the consent of any
Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect
or inconsistency; to provide for assumption of the Company's obligations to
Holders; or to make any change that does not adversely affect the rights of any
Holder.
13. Restrictive Covenants.
The Notes are unsecured general obligation of the Company limited to
$200,000,000 in aggregate principal amount. The Indenture does not limit other
unsecured debt. It does limit certain mortgages and sale-leaseback transactions
of Texaco Inc. if the property mortgaged or leased is a refinery or a
manufacturing plant in the United States or any oil or gas producing property
onshore or offshore the United States that is of material importance to the
total business of Texaco Inc. and its consolidated subsidiaries. The limitations
are subject to a number of
A-2-15
<PAGE>
important qualifications and exceptions. Once a year Texaco Inc. must report to
the Trustee on compliance with the limitations.
When a successor corporation assumes all the obligations of the Company
under the Notes and the Indenture with respect to the Notes, the Company will be
released from those obligations.
14. Defaults and Remedies.
An Event of Default is: default for 30 days in payment of interest on
the Notes; default in payment of principal on the Notes; failure by the Company
or by Texaco Inc., as the case may be, for 90 days after notice to the Company
to comply with any of its other agreements in the Notes or the Indenture; and
certain events of bankruptcy or insolvency. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable immediately. Holders
may not enforce the Notes or the Indenture with respect to the Notes except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Notes or the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the Notes may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders notice
of any continuing default (except a default in payment of principal or interest)
if it determines that withholding notice is in their interests.
15. Trustee Dealings with Company or Texaco Inc.
The Chase Manhattan Bank as Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company, Texaco Inc. or any affiliates of either, and
may otherwise deal with the Company, Texaco Inc. or any affiliates of either, as
if it were not Trustee.
16. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
or Texaco Inc. shall not have any liability for any obligations of the Company
or Texaco Inc. under the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
A-2-16
<PAGE>
17. Exchange for Definitive Notes.
The beneficial owner of all or a portion of this Note may exchange its
interest in this Note upon not less than 30 days' written notice to any Non-U.S.
Paying Agent through the relevant clearing system, in whole, for Notes in
definitive bearer form with interest coupons ("Coupons") attached ("Definitive
Notes") in denominations of U.S.$10,000. Interests in this Note shall also be
exchanged by the Company in whole, but not in part, for Definitive Notes if (i)
this Note is accelerated following an Event of Default or (ii) either the
Euroclear Operator or Cedel Bank is closed for business for a continuous period
of fourteen days (other than by reason of public holidays) or announces an
intention to cease business permanently or in fact does so. The Company shall
give notice to the Principal Paying Agent promptly following any such
acceleration or upon learning of any such closure. Any exchanges referred to
above shall be made at the office of the Principal Paying Agent, upon compliance
with the procedures set forth in the Indenture; provided that the Company shall
not be required to exchange this Note for a period of fifteen calendar days
preceding the first publication of a notice of redemption of the Notes. Upon
exchange of this Note in whole for Definitive Notes, the Principal Paying Agent
shall cause Schedule A of this Note to be endorsed to reflect the reduction of
the principal amount hereof by an amount equal to the aggregate principal amount
of such Definitive Notes, whereupon the principal amount hereof shall be reduced
for all purposes by the amount so exchanged and noted. All such exchanges of
this Note will be free of service charge, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. The date of any Definitive Note delivered upon any
exchange of this Note shall be such that no gain or loss of interest results
from such exchange.
All (and not less than all) interests in this Note will be exchanged
for Definitive Notes as soon as practicable after (i) the first beneficial owner
of an interest in this Note exchanges its interest for Definitive Notes or (ii)
the Company gives notice to the Principal Paying Agent of an acceleration of the
Note or the closure of a relevant clearing system as described above.
18. Authentication.
This Note shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
A-2-17
<PAGE>
GUARANTY
TEXACO INC., a Delaware corporation (the "Guarantor"), unconditionally
guarantees to the Holder of this Note the due and punctual payment of the
principal of and interest on this Note.
The Guarantor shall not be entitled to receive any payments based upon
a right of subrogation with respect to any amounts paid by the Guarantor to
Holders until the principal of and interest on all Notes shall have been paid in
full or for which payment has been provided.
TEXACO INC.
By: ______________________
[Title]
<PAGE>
SCHEDULE A
EXCHANGES FOR DEFINITIVE NOTES
AND FROM TEMPORARY GLOBAL NOTE,
AND CONVERSION
The initial principal amount of this Note is U.S.$200,000,000. The
following (A) exchanges of (i) portions of this Note for Definitive Notes and
(ii) portions of the Temporary Global Note for an interest in this Note or (B)
conversions of this Note at the option of the Holder have been made:
<TABLE>
<S> <C> <C> <C> <C> <C>
Date of Exchange Principal Amount Principal Amount Principal Amount Remaining Principal Notation Made by or on
or Conversion Exchanged From Exchanged For Converted at the Amount Outstanding Behalf of
the Temporary Definitive Notes Option of the Following Such Paying Agent
Global Note Holder Exchange or
Conversion
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<PAGE>
EXHIBIT A-3
[FORM OF FACE OF DEFINITIVE NOTE]
ISIN:
Serial No.: Certificate No.:
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE.
TEXACO CAPITAL INC.
3.50% Guaranteed Cash-Settled Convertible Notes Due 2004
Guaranteed by
TEXACO INC.
Interest Payable: August 5
Texaco Capital Inc. promises to pay to bearer, upon surrender hereof,
the principal sum of U.S.$10,000 on August 5, 2004 (except to the extent
previously redeemed or converted).
<PAGE>
Dated: TEXACO CAPITAL INC.
By: ______________________
[Title]
By: ______________________
[Title}
Authenticated:
[THE CHASE MANHATTAN BANK
as Trustee
By: ______________________
Authorized Officer]
[[Name of Authenticating Agent]
as Authenticating Agent
By: ______________________
Authorized Officer]
A-3-2
<PAGE>
[FORM OF REVERSE OF DEFINITIVE NOTE]
1. Interest.
Texaco Capital Inc. (the "Company"), a Delaware corporation, promises
to pay interest on the principal amount of this Note at the rate per annum shown
above. The Company will pay interest annually on August 5 of each year (each, an
"Interest Payment Date"). Interest on the Note will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
August 5, 1997 (the "Issue Date"). Except as provided in the Indenture, this
Note will cease to bear interest from and after the earliest of (a) August 5,
2004, (b) the Interest Payment Date immediately preceding the Conversion Date
(as defined below) relating to the conversion of this Note into the Conversion
Amount (as defined below) or, if there is no such Interest Payment Date, the
Issue Date or (c) the date fixed for redemption of this Note. If interest is
required to be calculated for a period of less than one year, it will be
calculated on the basis of a 360-day year consisting of 12 months of 30 days
each.
2. Method of Payment.
Payment of principal and interest on this Note will be made in
immediately available funds, subject to any applicable laws and regulations,
only against presentation and surrender of this Note or the relevant interest
coupon (a "Coupon"), as the case may be, at the office of any Non-U.S. Paying
Agent by check or, at the option of the Holder of this Note, by wire transfer of
immediately available funds to an account maintained by the payee with a bank
located outside the United States if appropriate wire transfer instructions have
been received by such Non-U.S. Paying Agent not less than 15 calendar days prior
to an applicable payment date. No payment on this Note or any Coupon
appertaining hereto will be made at any office or agency of the Company in the
United States (as defined below) or by check mailed to an address in the United
States or by wire transfer to an account maintained by the Holder of this Note
or such Coupon with a bank in the United States except as may be permitted under
United States federal tax laws and regulations then in effect without adverse
tax consequences to the Company. Notwithstanding the foregoing, in the event
that payment in U.S. dollars of the full amount payable on this Note or any
Coupon appertaining hereto at the offices of all Non-U.S. Paying Agents (as
defined below) would be illegal or effectively precluded as a result of exchange
controls or similar restrictions, payment on this Note or such Coupon will be
made by a Paying Agent in the Borough of
A-3-3
<PAGE>
Manhattan, The City of New York, if and only if (i) such Paying Agent, under
applicable law and regulations, would be able to make such payment and (ii) such
payment would not involve, in the opinion of the Company, adverse tax
consequences for the Company.
3. Paying and Conversion Agents.
Initially, The Chase Manhattan Bank, as Trustee (the "Trustee"), at its
office in London at Trinity Tower, 9 Thomas More Street, London E19YT, England,
will act as the principal Paying Agent for the Notes outside the United States
(the "Principal Paying Agent") and as the principal Conversion Agent for the
Notes outside the United States (the "Principal Conversion Agent"). Initially,
Chase Manhattan Bank Luxembourg S.A., at its office in Luxembourg at 5 rue
Plaetis, L-2338 Luxembourg, Luxembourg, will act as a Paying Agent and a
Conversion Agent in Luxembourg. The Company may appoint additional Paying Agents
or Conversion Agents or change any Paying Agent or Conversion Agent without
notice to Holders (any such additional Paying Agent or other Paying Agent for
the Notes outside the United States, a "Non-U.S. Paying Agent").
4. Indenture.
The Company issued this Note as part of a Series of Securities,
designated as "3.50% Guaranteed Cash-Settled Convertible Notes Due 2004" (the
"Notes"), under an indenture dated as of August 24, 1984, as supplemented and
restated by the First Supplemental Indenture dated as of January 31, 1990, as
further amended by the First Supplement to the First Supplemental Indenture
dated as of October 11, 1990, and as further amended by the Second Supplement to
the First Supplemental Indenture dated as of August 5, 1997 (as so supplemented
and amended, the "Indenture"), among the Company, Texaco Inc. and the Trustee.
The terms of this Note include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 7aaa-77bbbb) as amended (the "Act"). This Note is subject to all such
terms, and the Holder of this Note is referred to the Indenture and the Act for
a statement of them. All terms used in this Note which are defined in the
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Indenture.
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<PAGE>
5. Guaranty.
The Notes are guaranteed by Texaco Inc.
6. Conversion.
At any time during the Conversion Period (as defined below), this Note
may be surrendered for conversion into the cash Conversion Amount (as defined
below) at the option of the Holder hereof as follows. On any Business Day (as
defined below) during the Conversion Period, the Holder of this Note may give
notice to any Conversion Agent, who will provide copies to the Company, the
Calculation Agent, the Principal Conversion Agent and the Trustee, in writing in
the form provided in the Indenture (a "Conversion Notice"), that such Holder
elects to convert this Note into the Conversion Amount. To be converted, this
Note, together with all unmatured Coupons appertaining hereto (for this purpose
treating any Coupon expressed to be payable on the relevant Conversion Date as
an unmatured Coupon), must be surrendered to a Conversion Agent together with
the Conversion Notice relating thereto. Any question as to the validity of a
Conversion Notice or as to whether such notice has been properly and timely
given will be resolved finally by the Principal Conversion Agent in its sole
discretion. On and after the Conversion Date with respect to this Note,
unmatured Coupons relating hereto (whether or not attached hereto) shall become
void and no payment shall be made in respect thereof.
On the Settlement Date (as defined below) with respect to the
conversion of this Note, the Holder of this Note will be entitled to receive the
Conversion Amount in cash. Any payment of the Conversion Amount shall be deemed
to be a payment of principal for all purposes under the Indenture and the Notes.
As used herein:
(a) the term "Business Day" means any day that is not a
Saturday, a Sunday or a day on which banking institutions or trust
companies in the City of New York, the City of London or Luxembourg are
authorized or obligated by law or executive order to close;
(b) the term "Closing Price" means, with respect to any
security on any date, the closing sale price or last reported sale
price for the security on the principal securities exchange or national
market system on which such security is listed for trading or quoted on
such date or, if such security is not so listed or quoted on such date,
the fair market value of
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<PAGE>
such security on such date, as determined by the Calculation Agent,
in each case subject to adjustment as described below;
(c) the term "Conversion Amount" means, (i) if the relevant
Conversion Notice is delivered prior to notice of redemption having
been given by the Company, an amount in cash determined by the
Calculation Agent to be the Closing Price of the Texaco Common Stock on
the related Conversion Date (or, if the Conversion Date is not a
Trading Day, on the first following day that is a Trading Day)
multiplied by the Conversion Ratio, or (ii) if the relevant Conversion
Notice is delivered after the giving of a notice of redemption by the
Company or within eight Business Days prior to July 22, 2004, an amount
in cash determined by the Calculation Agent to be the average of the
Closing Prices of the Texaco Common Stock on the five consecutive
Trading Days commencing on the applicable Conversion Date multiplied by
the Conversion Ratio;
(d) the term "Conversion Date" means, with respect to any
Note surrendered for conversion, the second Business Day immediately
following the date of delivery of the related Conversion Notice to the
relevant Conversion Agent;
(e) the term "Conversion Period" means the period commencing
on September 15, 1997 and ending at 5:00 P.M., London time, on July 22,
2004 or, if this Note shall have been called for redemption prior to
August 5, 2004, ending at 5:00 P.M., London time, on the date eight
Business Days prior to the date fixed for redemption thereof; provided
that if the Company defaults in making payment in full in respect of
this Note or prior to the date fixed for redemption hereof, the
Conversion Period will continue until 5:00 P.M., London time, on the
date upon which the full amount of the moneys payable in respect of
this Note has been duly received by the Trustee and notice of such
receipt has been duly given to the Holders of the Notes by the Trustee;
(f) the term "Conversion Ratio" means 71.35 shares of Texaco
Common Stock per U.S. $10,000 principal amount of Notes;
(g) the term "Settlement Date" means the day as soon as
reasonably practicable after the Conversion Date determined by the
Calculation Agent and the Principal Conversion Agent to be the day for
payment of the Conversion Amount;
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<PAGE>
(h) the term "Texaco Common Stock" means the common stock
of Texaco Inc.; and
(i) "Trading Day" means, with respect to any security, any
day that is a trading day on the principal securities exchange or
national market system on which such security is then listed other than
a day on which (i) trading on such exchange or national market system
is scheduled to close prior to its regular weekday closing time or (ii)
there occurs any suspension of or limitation imposed on trading of such
security on such exchange during the one-half hour period that ends at
its regular weekday closing time that is, in the determination of the
Calculation Agent, material.
The Closing Price of the Texaco Common Stock on any of the Trading Days
used to calculate the Conversion Amount will be subject to adjustment by the
Calculation Agent as described below to the extent that any of the events
requiring such adjustment occurs during the period commencing on the date of
this Note and ending on such Trading Day.
Texaco Common Stock Dividends and Extraordinary Dividends and Distributions
In the event that a dividend or other distribution is declared (i) on
any class of Texaco capital stock, payable in shares of Texaco Common Stock,
(ii) on the Texaco Common Stock payable in cash in an amount greater than 10% of
the Closing Price of the Texaco Common Stock on the date fixed for the
determination of the shareholders of Texaco entitled to receive such cash
dividend (an "Extraordinary Cash Dividend"), or (iii) on the Texaco Common Stock
of evidences of indebtedness or assets (including securities, but excluding any
dividend or distribution covered by clause (i) or any Texaco Spin-off described
under "-Dissolution of Texaco; Mergers, Consolidations or Sales of Assets;
Spin-offs" below) (an "Extraordinary Distribution"), any Closing Price of the
Texaco Common Stock used to calculate the Conversion Amount on any Trading Day
that follows the date (the "Texaco Record Date") fixed for the determination of
the shareholders of Texaco entitled to receive such dividend or other
distribution shall be increased by multiplying such Closing Price by a fraction,
the numerator of which shall be the number of shares of Texaco Common Stock
outstanding on the Texaco Record Date plus the number of shares constituting
such distribution or, in the case of any Extraordinary Cash Dividend or
Extraordinary Distribution, plus the number of shares of Texaco Common Stock
that could be purchased with the amount of such Extraordinary Cash Dividend or
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<PAGE>
the fair market value (as determined by the Calculation Agent, whose
determination shall be conclusive and binding) of the evidences of indebtedness
or assets constituting such Extraordinary Distribution at the Closing Price on
the Trading Day immediately subsequent to such Texaco Record Date, and the
denominator of which shall be the number of shares of Texaco Common Stock
outstanding on the Texaco Record Date.
Subdivisions and Combinations of the Texaco Common Stock
In the event that the outstanding shares of Texaco Common Stock are
subdivided into a greater number of shares, the Closing Price of the Texaco
Common Stock used to calculate the Conversion Amount on any Trading Day that
follows the date on which such subdivision becomes effective will be
proportionately increased and, conversely, in the event that the outstanding
shares of Texaco Common Stock are combined into a smaller number of shares, such
Closing Price of the Texaco Common Stock will be proportionately reduced.
Reclassifications of the Texaco Common Stock
In the event that the Texaco Common Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification or otherwise (except to the extent otherwise
provided under "-Texaco Common Stock Dividends and Extraordinary Dividends and
Distributions" and "-Subdivisions and Combinations of Texaco Common Stock" above
or pursuant to a Reorganization Event described under "-Dissolution of Texaco;
Mergers, Consolidations or Sales of Assets; Spin-offs" below), the Conversion
Amount will be calculated by using the aggregate Closing Prices of the shares of
stock into which a share of Texaco Common Stock was changed on any Trading Day
that follows the effectiveness of such change.
As a result of the foregoing provisions, in the case of a
reorganization or reclassification of the Texaco Common Stock, the Closing
Prices of one or more securities in addition to or in substitution for the
Texaco Common Stock may be used to calculate the Conversion Amount. For example,
if the Texaco Common Stock were reclassified into one share of Texaco Class A
Common Stock and one share of Texaco Class B Common Stock, the Conversion Amount
would be calculated by reference to the Closing Prices of the Texaco Class A
Common Stock and the Texaco Class B Common Stock.
A-3-8
<PAGE>
Other Dilution Events
In the event that the Company (with the prior written approval of the
Calculation Agent) or the Calculation Agent determines that an adjustment should
be made to the Closing Price of the Texaco Common Stock on any of the Trading
Days used to calculate the Conversion Amount as a result of one or more events
or circumstances not otherwise described above (even if such event or
circumstance is specifically excluded from the operation of the provisions
described above), the Company shall at its own expense and acting reasonably
request the Calculation Agent to determine as soon as practicable what
adjustment (if any) is fair and reasonable to take account thereof.
Dissolution of Texaco; Mergers, Consolidations or Sales of Assets;
Spin-offs
In the event of any (i) consolidation or merger of Texaco with or into
another entity (other than a consolidation or merger that does not result in a
reclassification, conversion, exchange or cancellation of outstanding Texaco
Common Stock), (ii) sale, transfer, lease or conveyance of all or substantially
all of the assets of Texaco, (iii) liquidation, dissolution or winding up of
Texaco or (iv) declaration of a distribution on the Texaco Common Stock of the
common stock of any subsidiary of Texaco (a "Texaco Spin-off") (any of the
events described in (i), (ii), (iii) or (iv), a "Reorganization Event"), for
purposes of determining the Conversion Amount, the Closing Price of the Texaco
Common Stock on any Trading Day subsequent to, in the case of a Reorganization
Event other than a Texaco Spin-off, the effective time of such Reorganization
Event or, in the case of a Texaco Spin-off, the record date fixed for the
determination of the shareholders of Texaco entitled to receive the securities
distributed in such Texaco Spin-off (the "Spin-off Record Date") will be deemed
to be the amount equal to (1) the value of the cash and other property
(including securities) received by a holder of a share of Texaco Common Stock
(assuming such holder of Texaco Common Stock failed to exercise any rights of
election and received per share the kind and amount received by a plurality of
non-electing shares) in any such Reorganization Event (plus, in the case of a
Texaco Spin-off, the value of a share of Texaco Common Stock), and (2) to the
extent that such holder obtains securities in any Reorganization Event, the
value of the cash and other property received by the holder of such securities
in any subsequent event with respect to the issuer of such securities that
would, if such issuer were Texaco, be a Reorganization Event. For purposes of
determining any such Closing Prices, the value of (i) any cash and other
property (other than securities) received in any such Reorganization Event will
be an amount equal to the value of such cash and other property at the effective
time of such Reorganization Event (as determined
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<PAGE>
by the Calculation Agent, whose determination shall be conclusive and binding),
and (ii) any property consisting of securities received in any such
Reorganization Event will be an amount equal to the Closing Prices of such
securities on any Trading Day following, in the case of a Reorganization Event
other than a Texaco Spin-off, the effective time of such Reorganization Event
or, in the case of a Texaco Spin-off, the Spin-off Record Date.
If any action would require adjustment of the Closing Price pursuant to
more than one of the foregoing provisions, only one adjustment shall be made and
such adjustment shall be the amount of adjustment that has the highest absolute
value to the Holder of this Note. No adjustment in the Closing Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% of the Closing Price, but any adjustment that would otherwise be
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
The Calculation Agent will promptly notify the Company and the
Principal Conversion Agent, which will in turn notify the Holders, of any event
requiring an adjustment and of the method of calculation to be used to make any
dilution adjustment as described above.
All determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error, shall
be conclusive for all purposes and binding on the Company and the Holders, and
the Calculation Agent shall have no liability therefor. All results of any
calculation of the Conversion Amount will be rounded, if necessary, to the
nearest one-one-hundred-thousandth of a percent (with five one-millionths of a
percentage point being rounded downward).
7. Redemption.
The Notes are redeemable, at the option of the Company, in whole but
not in part, at any time on or after August 5, 1999, at the principal amount
thereof upon not less than 15 days' nor more than 30 days' notice to Holders.
8. Tax Redemption.
The Notes may be redeemed as a whole, at the option of the Company at
any time prior to maturity, upon the giving of a notice of redemption in the
manner provided in the Indenture, at the principal amount thereof, together with
accrued interest to the date fixed for redemption, if the Company determines
that,
A-3-10
<PAGE>
as a result of any change in or amendment to the laws (or any regulations or
rulings promulgated thereunder) of the United States or of any political
subdivision or taxing authority thereof or therein affecting taxation, or any
change in official position regarding the application or interpretation of such
laws, regulations or rulings, which change or amendment becomes effective on or
after the date of this Note, the Company or Texaco Inc., as the case may be, has
or will become obligated to pay Additional Amounts (as defined below) with
respect to the Notes as described below under paragraph 9 hereof. Prior to the
giving of any notice of redemption pursuant to this paragraph, the Company shall
deliver to the Trustee (i) a certificate stating that the Company is entitled to
effect such redemption and setting forth a statement of facts showing that the
conditions precedent to the right of the Company to so redeem have occurred (the
date on which such certificate is delivered to the Trustee being the "Redemption
Determination Date"), and (ii) an opinion of counsel reasonably acceptable to
the Trustee to such effect based on such statement of facts; provided that no
such notice of redemption shall be given earlier than 60 days prior to the
earliest date on which the Company or Texaco Inc., as the case may be, would be
obligated to pay such Additional Amounts if a payment in respect of any Note
were then due.
If the Company shall determine that any payment made outside the United
States by the Company or Texaco Inc., as the case may be, by any Paying Agent of
principal or interest due in respect of any Note or Coupon would, under any
present or future laws or regulations of the United States, be subject to any
certification, identification or other information reporting requirement of any
kind, the effect of which is the disclosure to the Company, Texaco Inc., any
Paying Agent or any governmental authority of the nationality, residence or
identity of a beneficial owner of such Note or Coupon who is a United States
Alien (as defined below under ", Payment of Additional Amounts") (other than
such a requirement (a) that would not be applicable to a payment made by the
Company or Texaco Inc., as the case may be, or any Paying Agent (i) directly to
the beneficial owner or (ii) to a custodian, nominee or other agent of the
beneficial owner, or (b) that can be satisfied by such custodian, nominee or
other agent certifying to the effect that such beneficial owner is a United
States Alien; provided that in each case referred to in clauses (a)(ii) and (b)
payment by such custodian, nominee or agent to such beneficial owner would not
otherwise be subject to any such requirement), the Company shall redeem the
Notes, as a whole, at the principal amount thereof, together with accrued
interest to the date fixed for redemption or, at the election of the Company or
Texaco Inc., as the case may be, if the conditions of the next paragraph are
satisfied, pay the additional amounts specified in such paragraph. The Company
shall make such determination and election as soon as practicable and publish
prompt notice
A-3-11
<PAGE>
thereof (the "Determination Notice") stating the effective date of such
certification, identification or other information reporting requirements,
whether the Company will redeem the Notes or has elected to pay the additional
amounts specified in the next paragraph, and (if applicable) the last date by
which the redemption of the Notes must take place, as provided in the next
sentence. If the Company redeems the Notes, such redemption shall take place on
such date, not later than one year after the publication of the Determination
Notice, as the Company shall elect by notice to the Trustee. Notwithstanding the
foregoing, the Company shall not so redeem the Notes if the Company or Texaco
Inc., as the case may be, shall subsequently determine, not less than 30 days
prior to the date fixed for redemption, that subsequent payments would not be
subject to any such certification, identification or other information reporting
requirement, in which case the Company shall publish prompt notice of such
determination and any earlier redemption notice shall be revoked and of no
further effect.
If and so long as the certification, identification or other
information reporting requirements referred to in the preceding paragraph would
be fully satisfied by payment of a backup withholding tax or similar charge, the
Company or Texaco Inc., as the case may be, may elect to pay as additional
amounts such amounts as may be necessary so that every net payment made outside
the United States following the effective date of such requirements by the
Company or Texaco Inc., as the case may be, or any Paying Agent of principal or
interest due in respect of any Note or any Coupon of which the beneficial owner
is a United States Alien (but without any requirement that the nationality,
residence or identity of such beneficial owner be disclosed to the Company,
Texaco Inc., any Paying Agent or any governmental authority, with respect to the
payment of such additional amounts), after deduction or withholding for or on
account of such backup withholding tax or similar charge (other than a backup
withholding tax or similar charge that (i) would not be applicable in the
circumstances referred to in the second parenthetical clause of the first
sentence of the preceding paragraph, or (ii) is imposed as a result of
presentation of such Note or Coupon for payment more than 15 days after the date
on which such payment becomes due and payable or on which payment thereof is
duly provided for, whichever occurs later), will not be less than the amount
provided for in such Note or Coupon to be then due and payable. In the event the
Company or Texaco Inc., as the case may be, elects to pay any additional amounts
pursuant to the applicable provisions of this paragraph, the Company shall have
the right to redeem the Notes as a whole at any time pursuant to the provisions
of the preceding paragraph and the redemption price of such Notes will not be
reduced for applicable withholding taxes. If the Company or Texaco Inc., as the
case may be, elects to pay additional amounts pursuant to this paragraph and the
condition specified in the first sentence of this
A-3-12
<PAGE>
paragraph should no longer be satisfied, then the Company will redeem the Notes
as a whole, pursuant to the applicable provisions of the preceding paragraph.
9. Payment of Additional Amounts.
The Company will, subject to certain exceptions and limitations set
forth below, pay such additional amounts (the "Additional Amounts") to the
Holder of this Note or of any Coupon appertaining hereto who is a United States
Alien as may be necessary in order that every net payment of the principal of
and interest on this Note and any other amounts payable on such Note, after
withholding for or on account of any present or future tax, assessment or
governmental charge imposed upon or as a result of such payment by the United
States (or any political subdivision or taxing authority thereof or therein),
will not be less than the amount provided for in this Note or such Coupon to be
then due and payable. The Company will not, however, be required to make any
payment of Additional Amounts to any such Holder for or on account of:
(a) any such tax, assessment or other governmental charge that
would not have been so imposed but for (i) the existence of any
present or former connection between such Holder (or between a
fiduciary, settlor, beneficiary, member or shareholder of such Holder,
if such Holder is an estate, a trust, a partnership or a corporation)
and the United States and its possessions, including, without
limitation, such Holder (or such fiduciary, settlor, beneficiary,
member or shareholder) being or having been a citizen or resident
thereof or being or having been engaged in a trade or business or
present therein or having or having had a permanent establishment
therein or (ii) the presentation by the Holder of this Note or any
such Coupon for payment on a date more than 15 days after the date on
which such payment became due and payable or the date on which payment
thereof is duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer or personal
property tax or any similar tax, assessment or governmental charge;
(c) any tax, assessment or other governmental charge imposed by
reason of such Holder's past or present status as a personal holding
company or foreign personal holding company or controlled foreign
corporation or passive foreign investment company with respect to the
United States or as a corporation that accumulates earnings to avoid
United States federal income tax or as a private foundation or other
tax-exempt organization;
A-3-13
<PAGE>
(d) any tax, assessment or other governmental charge that is
payable otherwise than by withholding from payments on or in respect
of this Note;
(e) any tax, assessment or other governmental charge required to
be withheld by any Paying Agent from any payment of principal of or
interest on this Note, if such payment can be made without such
withholding by any other Paying Agent in a city in Western Europe; (f)
any tax, assessment or other governmental charge that would not have
been imposed but for the failure to comply with certification,
information or other reporting requirements concerning the
nationality, residence or identity of the owner or beneficial owner of
this Note, if such compliance is required by statute or by regulation
of the United States or of any political subdivision or taxing
authority thereof or therein as a precondition to relief or exemption
from such tax, assessment or other governmental charge;
(g) any tax, assessment or other governmental charge imposed by
reason of such Holder's past or present status as the actual or
constructive owner of 10% or more of the total combined voting power
of all classes of stock entitled to vote of the Company or as a direct
or indirect subsidiary of the Company; or
(h) any combination of items (a), (b), (c), (d), (e), (f) or (g);
nor shall Additional Amounts be paid with respect to any payment on this Note to
a United States Alien who is a fiduciary or partnership or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of the United States (or any political subdivision thereof) to be
included in the income, for tax purposes, of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership or a beneficial owner
who would not have been entitled to the Additional Amounts had such beneficiary,
settlor, member or beneficial owner been the Holder of this Note.
As used herein, the term "United States Alien" means any person who,
for United States federal income tax purposes, is a foreign corporation, a
nonresident alien individual, a nonresident alien fiduciary of a foreign estate
or trust, or a foreign partnership one or more of the members of which is a
foreign corporation, a nonresident alien individual or a nonresident alien
fiduciary of a foreign estate or trust.
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<PAGE>
10. Transfer.
The Holder of this Note may transfer this Note in accordance with the
Indenture. The Company may require the Holder of this Note, among other things,
to furnish appropriate endorsements and transfer documents and to pay any taxes
and fees required by law or permitted by the Indenture.
11. Persons Deemed Owners.
The bearer of this Note may be treated as the owner of it for all
purposes.
12. Amendments and Waivers.
Subject to certain exceptions, the Notes or the Indenture with respect
to the Notes may be amended with the consent of the Holders of at least 50.1% in
principal amount of the Notes outstanding, and any past default or compliance
with any provision may be waived with the consent of the Holders of at least
50.1% in principal amount of the Notes outstanding. Without the consent of any
Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect
or inconsistency; to provide for assumption of the Company's obligations to
Holders; or to make any change that does not adversely affect the rights of any
Holder.
13. Restrictive Covenants.
The Notes are unsecured general obligation of the Company limited to
$200,000,000 in aggregate principal amount. The Indenture does not limit other
unsecured debt. It does limit certain mortgages and sale-leaseback transactions
of Texaco Inc. if the property mortgaged or leased is a refinery or a
manufacturing plant in the United States or any oil or gas producing property
onshore or offshore the United States that is of material importance to the
total business of Texaco Inc. and its consolidated subsidiaries. The limitations
are subject to a number of important qualifications and exceptions. Once a year
Texaco Inc. must report to the Trustee on compliance with the limitations.
When a successor corporation assumes all the obligations of the Company
under the Notes and the Indenture with respect to the Notes, the Company will be
released from those obligations.
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<PAGE>
14. Defaults and Remedies.
An Event of Default is: default for 30 days in payment of interest on
the Notes; default in payment of principal on the Notes; failure by the Company
or by Texaco Inc., as the case may be, for 90 days after notice to the Company
to comply with any of its other agreements in the Notes or the Indenture; and
certain events of bankruptcy or insolvency. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable immediately. Holders
may not enforce the Notes or the Indenture except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Notes or the Indenture with respect to the Notes. Subject to certain
limitations, Holders of a majority in principal amount of the Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests.
15. Trustee Dealings with Company or Texaco Inc.
The Chase Manhattan Bank as Trustee under the Indenture, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company, Texaco Inc. or any affiliates of either, and
may otherwise deal with the Company, Texaco Inc. or any affiliates of either, as
if it were not Trustee.
16. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the Company
or Texaco Inc. shall not have any liability for any obligations of the Company
or Texaco Inc. under the Notes or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
17. Authentication.
This Note shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.
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<PAGE>
GUARANTY
TEXACO INC., a Delaware corporation (the "Guarantor"), unconditionally
guarantees to the Holder of this Note the due and punctual payment of the
principal of and interest on this Note.
The Guarantor shall not be entitled to receive any payments based upon
a right of subrogation with respect to any amounts paid by the Guarantor to
Holders until the principal of and interest on all Notes shall have been paid in
full or for which payment has been provided.
TEXACO INC.
By: ______________________
[Title]
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<PAGE>
[FORM OF FACE OF COUPON]
ISIN:
Serial No.: No.:
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE
CODE.
TEXACO CAPITAL INC.
3.50% Guaranteed Cash-Settled Convertible Notes Due 2004
Guaranteed by
TEXACO INC.
Coupon for U.S. $350, due on August 5, [1998, 1999, 2000, 2001, 2002,
2003, 2004].
This Coupon is separately negotiable, payable to bearer, subject to the terms of
the Notes.
A-3-18
<PAGE>
[FORM OF REVERSE OF COUPON]
TRUSTEE
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
PRINCIPAL PAYING AND CONVERSION AGENT
The Chase Manhattan Bank
Trinity Tower
9 Thomas More Street
London E19YT
England
Attention: Global Trust Services
LUXEMBOURG PAYING AND CONVERSION AGENT
Chase Manhattan Bank Luxembourg S.A.
5 rue Plaetis
L-2338 Luxembourg
Luxembourg
and such other or further Non-U.S. Paying Agents or Conversion Agents or
specified offices as may from time to time be duly appointed by the Company.
A-3-19
<PAGE>
EXHIBIT B
[FORM OF CONVERSION NOTICE]
TEXACO CAPITAL INC.
3.50% Guaranteed Cash-Settled Convertible Notes Due 2004
Guaranteed by
TEXACO INC.
Delivery of Conversion Notice
Holders and beneficial owners wishing to convert Notes into the cash Conversion
Amount should complete two original copies of this notice and deliver one (in
person or by pre-paid mail) to Texaco Capital Inc. and the other in person, by
pre-paid mail or by tested telex confirmed in writing, to:
If the Notes to be converted are represented by the Permanent Global Note or
Definitive Notes held in a clearing system
The Euroclear Operator or Cedel Bank at the offices specified below or such
other clearing system, as the case may be, with copies to the Principal
Conversion Agent and the Trustee, each at its office specified below. A copy may
also be sent to the Luxembourg Conversion Agent at its office specified below.
If the Notes to be converted are Definitive Notes not held in a clearing system
The Principal Conversion Agent or the Luxembourg Conversion Agent at its office
specified below, together with the definitive individual certificate(s)
representing the Notes to be converted, with copies of the Conversion Notice to
the Trustee and, if the original Conversion Notice is delivered to the
Luxembourg Conversion Agent, the Principal Conversion Agent, each at its office
specified below.
<PAGE>
Address for delivery of Conversion Notice:
Cedel Bank: Cedel Bank, societe anonyme
67 Boulevard Grande-Duchesse Charlotte
Luxembourg-Ville
L-1010 Luxembourg
Attention: OCE Department
Telex: 2791
Euroclear Operator: Morgan Guaranty Trust Company of New York
(as operator of the Euroclear System)
Brussels office
Boulevard Emile Jacqmain 151
B-1210 Brussels
Belgium
Attention: Custody Processing Department
Telex: 61025 MGTEC B
Principal Conversion
Agent: The Chase Manhattan Bank
Trinity Tower
Thomas More Street
London E19YT
England
Attention: Manager, Global Trust Operations
Fax: 44 1202 34 7945
Telex: 8954681 CMBG
Luxembourg
Conversion Agent: Chase Manhattan Bank Luxembourg S.A.
5 rue Plaetis
L-2338 Luxembourg
Luxembourg
Attention: Manager, Global Trust Operations
Fax: 352 4626 85380
Telex: 1233 CHASLU
B-2
<PAGE>
Texaco Capital Inc.: c/o Texaco Inc.
2000 Westchester Avenue
White Plains, New York 10650
United States
Attention:
Fax:
Trustee: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
United States
Attention:
Fax:
Failure to properly complete and deliver this Notice (in the determination of
the Principal Conversion Agent (in consultation with the Euroclear Operator or
Cedel Bank, as the case may be, if the Notes to be converted are represented by
the Permanent Global Note or Definitive Notes held by the Euroclear Operator or
Cedel Bank)) may result in this Notice being treated as null and void.
B-3
<PAGE>
Terms defined in the Notes shall have the same meanings herein.
I, the Holder or beneficial owner specified in paragraph 1 below, being the
Holder or beneficial owner of the Notes referred to above, acknowledge that such
Notes are convertible into the cash Conversion Amount in accordance with the
terms of the Notes and hereby irrevocably authorize Texaco Capital Inc. (the
"Company") to convert such Notes as are specified in paragraph 2 below for the
cash Conversion Amount to which I am entitled with respect to such Notes.
1. Name and address of Holder or beneficial owner:
______________________________________________
______________________________________________
______________________________________________
2. Aggregate principal amount of Notes to be converted:
U.S.$________________
Certificate numbers of Notes (if relevant):1 __________________________
Details (including in respect of any missing unmatured Coupon):2
_______________________________________________________________________
3. Instructions to the Euroclear Operator/Cedel Bank3
I hereby irrevocably authorize and instruct the Euroclear
Operator/Cedel Bank to debit the principal amount of Notes referred to
above from the account referred to below on the Conversion Date.
- ----------
1 Not required for Notes represented by the Permanent Global Note or
those held in a clearing system.
2 An indemnity may be required in respect of missing unmatured
Coupons.
3 Not required where Definitive Notes are held outside clearing
systems.
B-4
<PAGE>
Account No: ____________________________________________
Name of Account: _______________________________________
I confirm that the Account referred to above is outside the United
States and is the account to be credited with the Conversion Amount.
4. Bank Account Details for Holders of Notes held outside clearing systems
Details of my bank account (which is outside the United States) to
which the Conversion Amount shall be paid are as follows:
Receiving Bank: ________________________________________
Account Number: ________________________________________
Name of Account: ________________________________________
5. Representations
I hereby represent and warrant that the Notes referred to above (and
any Coupons appertaining thereto) are free from all liens, charges,
encumbrances and all other third party rights.
6. Authorization of production in proceedings
I hereby authorize the production of this Notice in any administrative
or legal proceedings instituted in connection with the Notes to which
this Notice relates or otherwise in connection with establishing
compliance with applicable laws.
Signed: ________________________ Date: __________________
B-5
<PAGE>
________________________________________________________________________________
For Agent's use only:
1. (A) Conversion Date:
2. (A) Aggregate principal amount of Notes surrendered for conversion:
(B) Conversion Amount deliverable:
3. Details of any indemnity obtained in respect of missing unmatured
Coupons:
B-6
EXHIBIT 11
<TABLE>
<CAPTION>
TEXACO INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
--------------------------------------------------------------
(Millions of dollars, except per share amounts)
(Unaudited)
-------------------------------------------------
For the six months For the three months
Primary Net Income Per Common Share ended June 30, ended June 30,
- ----------------------------------- ------------------ --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 1,551 $ 1,075 $ 571 $ 689
Less: Preferred stock dividend requirements (28) (29) (14) (14)
------- ------- ------- -------
Primary net income available for common stock $ 1,523 $ 1,046 $ 557 $ 675
======= ======= ======= =======
Average number of primary common shares
outstanding for computation of earnings
per share (thousands) 260,080 260,709 260,090 260,764
======= ======= ======= =======
Primary net income per common share $ 5.86 $ 4.01 $ 2.14 $ 2.59
======= ======= ======= =======
Fully Diluted Net Income Per Common Share
- -----------------------------------------
Net income $ 1,551 $ 1,075 $ 571 $ 689
Less: Preferred stock dividend requirements of
non-dilutive and anti-dilutive issues and
adjustments to net income associated with
dilutive securities (11) (12) (5) (6)
------- ------- ------- -------
Fully diluted net income $ 1,540 $ 1,063 $ 566 $ 683
======= ======= ======= =======
Average number of primary common shares
outstanding for computation of earnings
per share (thousands) 260,080 260,709 260,090 260,764
Additional shares outstanding assuming full conversion
of dilutive convertible securities into common
stock (thousands):
Convertible debentures 144 146 144 146
Convertible Preferred Stock
Series B ESOP 9,171 9,475 9,114 9,423
Series F ESOP 570 607 568 599
Other 17 26 16 22
------- ------- ------- -------
Average number of fully diluted common
shares outstanding for computation of earnings
per share (thousands) 269,982 270,963 269,932 270,954
======= ======= ======= =======
Fully diluted net income per common share $ 5.70 $ 3.92 $ 2.10 $ 2.52
======= ======= ======= =======
</TABLE>
EXHIBIT 12
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
OF TEXACO ON A TOTAL ENTERPRISE BASIS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
FOR EACH OF THE FIVE YEARS ENDED DECEMBER 31, 1996 (a)
------------------------------------------------------
(Millions of dollars)
For the Six Years Ended December 31,
Months Ended -----------------------------------------
June 30, 1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations, before provision or
benefit for income taxes and cumulative effect of
accounting changes effective 1-1-92 and 1-1-95.......... $1,813 $3,450 $1,201 $1,409 $1,392 $1,707
Dividends from less than 50% owned companies
more or (less) than equity in net income................ (7) (4) 1 (1) (8) (9)
Minority interest in net income............................ 37 72 54 44 17 18
Previously capitalized interest charged to
income during the period................................ 19 27 33 29 33 30
------ ------ ------ ------ ------ ------
Total earnings..................................... 1,862 3,545 1,289 1,481 1,434 1,746
------ ------ ------ ------ ------ ------
Fixed charges:
Items charged to income:
Interest charges...................................... 261 551 614 594 546 551
Interest factor attributable to operating
lease rentals.................................... 64 129 110 118 91 94
Preferred stock dividends of subsidiaries
guaranteed by Texaco Inc......................... 16 35 36 31 4 -
------ ------ ------ ------ ------ ------
Total items charged to income...................... 341 715 760 743 641 645
Interest capitalized.................................... 10 16 28 21 57 109
Interest on ESOP debt guaranteed by Texaco Inc.......... 4 10 14 14 14 18
------ ------ ------ ------ ------ ------
Total fixed charges................................ 355 741 802 778 712 772
------ ------ ------ ------ ------ ------
Earnings available for payment of fixed charges............ $2,203 $4,260 $2,049 $2,224 $2,075 $2,391
(Total earnings + Total items charged to income) ====== ====== ====== ====== ====== ======
Ratio of earnings to fixed charges of Texaco
on a total enterprise basis............................. 6.21 5.75 2.55 2.86 2.91 3.10
====== ====== ====== ====== ====== ======
<FN>
(a) Excludes discontinued operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TEXACO INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 564
<SECURITIES> 46
<RECEIVABLES> 4,546
<ALLOWANCES> 22
<INVENTORY> 1,632
<CURRENT-ASSETS> 7,055
<PP&E> 34,462
<DEPRECIATION> 20,878
<TOTAL-ASSETS> 27,041
<CURRENT-LIABILITIES> 5,431
<BONDS> 5,067
0
633
<COMMON> 1,454
<OTHER-SE> 9,328
<TOTAL-LIABILITY-AND-EQUITY> 27,041
<SALES> 22,796
<TOTAL-REVENUES> 23,525
<CGS> 17,969
<TOTAL-COSTS> 19,413
<OTHER-EXPENSES> 2,217
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203
<INCOME-PRETAX> 1,692
<INCOME-TAX> 141
<INCOME-CONTINUING> 1,551
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,551
<EPS-PRIMARY> 5.86
<EPS-DILUTED> 5.70
</TABLE>
